Business   

Budget: tax proposals for individuals, HUFs

What are the tax proposals for individuals and HUFs in the budget?

The main relief is for those who have been filing income-tax returns though they had no taxable income, merely because they are covered by the one-by-six rule. The scheme was initiated to spot those who declare non-taxable income, though they have comfortable means of living as indicated by their possession of any one of the listed six items. It might have served some purpose if there had been a check of such returns. There was also no meaning in asking such persons to file returns every year. It is proper that the requirement under the proviso to Sec. 139(1) to file return is dropped with effect from the current financial year, so that there is no need to file return of income even for the current financial year 2005-06, that is, assessment year 2006-07.

Individuals and Hindu Undivided Families (HUF) are now eligible for deduction under Sec. 80C up to Rs. 1 lakh in respect of investments listed therein. The much feared Exempt, Exempt and Tax (EET) scheme has not come about, so that the same benefit will continue for the coming year as well. There is of one more eligible avenue of investment in fixed deposits in scheduled banks for a minimum period of five years. There is no sub-limit for this investment, so that it will be possible for a person to make such a deposit of Rs. 1 lakh without any other item of savings to deserve this deduction. It is not an extra deduction but part of Rs. 1 lakh.

The benefit of Sec. 80C is available both for individuals and HUFs, but then a PF account could not be opened by a HUF with effect from May 13, 2005, while National Saving Certificates (VIII Series) are not available for HUF with effect from May 13, 2005. HUFs will be eligible for other listed savings, including bank deposits.

Some readers complain that more than Rs. 70,000 is not being accepted in PPF accounts though Sec. 80C limit had been enlarged to Rs. 1 lakh. But then, there is no similar enlargement of maximum permissible contribution in a year under Rule 3 of PPF Scheme, 1968, which had raised the maximum from Rs. 60,000 to Rs. 70,000 and minimum from Rs. 100 to Rs. 500 for a year from November 15, 2002. In fact, even if any excess over maximum had been received in deposit by mistake, such excess is bound to be returned without interest.

Ceiling in respect of another avenue for savings by way of contribution to annuity policy approved in this behalf under Sec. 80CCC is raised from Rs. 10,000 to Rs. 1 lakh. But this was covered by the EET scheme so that the yield from the same as annuity, known also as pension, and the receipt on maturity is taxable, the benefit being merely one of postponement of liability.

S. Rajaratnam

Printer friendly page  
Send this article to Friends by E-Mail

Stories in this Section

Belied budget hopes and a wish list
Buoyant economy helpful
Market valuations reinforced
Budget: tax proposals for individuals, HUFs
On-line applications expanded

Copyright © 2006, The Hindu. Republication or redissemination of the contents of this screen are expressly prohibited without the written consent of The Hindu