No change in personal income tax

New Delhi: As Finance Minister P Chidambaram presented the Budget proposals on Tuesday, he said that there will be no change in the rates of personal income tax or corporate income tax.

The Minister abolished one-by-six scheme under the Income Tax Act, obliging certain categories of persons to file returns.

Responding to the demand for tax exemption on fixed deposits of certain tenure, the Finance Minister proposed to include investments in fixed deposits in scheduled banks for a term of not less than five years in Section 80C of the Income Tax Act.

He also proposed to remove the limit of Rs 10,000 in respect of contribution to certain pension funds in Section 80CC, subject to the overall ceiling of Rs 1 lakh.

The Finance Minister also proposed to remove the exemption under Section 10(23G), which he said, was not relevant when interest rates are moderate.

Hightlight: Personal Taxes

• No change in rates of personal or corporate income taxes
• No new taxes imposed
• Rs 10,000 tax exemption limit for investment in pension funds
• FDs in scheduled banks with five-year maturity to get exemption under Section 80C
• Rs 10,000 exemption limit for investment in pension funds under Sec 80CCC removed
• Pension funds investments brought under Sec 80C subject to a ceiling of Rs 1 lakh
• More transactions to come under PAN
• One-by-six scheme under the IT Act abolished
• Banking cash transaction tax will continue
• FBT modified, threshhold limits raised
• FBT on tuor and travel reduced to 5 pc from 20 pc

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Impact

While the Finance Minister has not changed income tax rates for individuals, he has made a few important changes on the savings side. Here are the highlights of the budget impact on personal taxes.

Ø One-by-six scheme for filing tax returns abolished. Now you would have to file tax returns only if you have income over the tax-exempt limit of Rs 1 lakh (Rs 1.35 lakh for women and Rs 1.85 lakh for senior citizens)

Ø Ceiling of Rs 10,000 per annum for investments in pension policies under section 80CCC removed. You can now invest up to Rs 1 lakh in pension policies. This will give a boost to your retirement planning.

Ø Investments in fixed deposits of scheduled banks for a term of more than 5 years is now eligible for a deduction of up to Rs 1 lakh under section 80C. So now, along with investments in Public Provident Fund, National Savings Certificates, Insurance, ELSS, you can also invest in bank fixed deposits.

Ø Cash transaction tax continues on cash withdrawals of over Rs 25,000 from current accounts

Ø Section 54EC for reinvestment of sale proceeds of capital asset amended. You can now invest the sale proceeds only in bonds of National Highways Authority of India and Rural Electrification Corporation, to enjoy tax-free capital gains, as against bonds of NABARD, NHB and SIDBI allowed earlier.

Ø Section 54ED, which allowed you to invest sale proceeds of capital assets in listed equities now abolished.

Ø You will be required to quote your Permanent Account Number (PAN) in more transactions now

Ø Service tax increased from 10% to 12%. More services brought under the scope of service tax.