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Impact on individual taxation

What is the effect of the budget on taxation of individuals/Hindu Undivided Families?

The minimum exemption limit has been increased by Rs. 10,000 so that there should be a tax relief of Rs.1,000 for individuals, Hindu Undivided Families (HUF) and women and Rs. 2,000 for senior citizens. But this may be partly offset by increase in the education cess from 2 to 3 per cent, so that the senior citizens in the 20 per cent bracket will get relief of about Rs. 1,860, while women will get Rs. 990. If the income exceeds Rs. 5.10 lakh, the advantage gets fully neutralised by the increased cess. Those with income more than Rs.10 lakh will be much worse off.

The deduction under section 80D for medical insurance will be enhanced from Rs. 10,000 to Rs. 15,000 with senior citizens being entitled to Rs. 20,000. This will be over and above, what is otherwise available under Sec. 80C.

Another relief is deduction of interest on educational loan under Sec. 80E, which will now be extended to spouse or parent of the student for higher education. This is a welcome amendment, which should probably facilitate easier study loans.

Clause (vii) as substituted under Sec.10(15)(fa) would exempt interest from bonds issued by a local authority, State Pooled Finance Entity or otherwise specified by the Central Government, so that if and when such tax-free bonds are issued and are available to a subscriber, it will greatly benefit those in the top and middle brackets.

S. RAJARATNAM

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