The Budget fever is over and honorable Finance Minister Mr.Pranab Mukharjee has presented Union budget for the year 2010-11. Though it did not impress “Aam aadmi” but middle class salaried employees have a reason to smile. Yes, Finance minister has kept more money in our pockets.

Tax slabs are increased as follows:

Taxable Income Pre-budget (in Rs) Taxable Income Post-budget(in Rs) Rate (%)
Men Up to 160,000 Up to 160,000 Nil
160,001 – 3,00,000 160,001 – 500,000 10
3,00,001 – 500,000 5,00,001 – 800,000 20
500,001 upwards 8,00,000 upwards 30
Women Up to 190,000 Up to 190,000 Nil
190,001 – 3,00,000 190,001 – 500,000 10
3,00,001 – 500,000 5,00,001 – 800,000 20
500,001 upwards 8,00,000 upwards 30
Senior Citizen Up to 240,000 Up to 240,000 Nil
240,001 – 3,00,000 240,001 – 500,000 10
3,00,001 – 500,000 5,00,001 – 800,000 20
500,001 upwards 8,00,000 upwards 30

Impact of changes for men, women and senior citizen:

Taxable income (Rs) Tax –before budget (Rs) Tax after budget (Rs) Saving (Rs)
Men 200000 4120 4120 0
500000 55620 35019 20601
1000000 210120 158619 51501
1200000 271919 220419 51500
1500000 364619 313119 51500
2000000 519119 467619 51500
2500000 673619 622119 51500
4000000 1137119 1085619 51500
Women 200000 1029 1029 0
500000 52529 31929 20600
1000000 207029 155529 51500
1200000 268829 217329 51500
1500000 361529 310029 51500
2000000 516029 464529 51500
2500000 670529 619029 51500
4000000 1134029 1082529 51500
Senior citizen 200000 0 0 0
500000 47379 26000 21379
1000000 201879 150379 51500
1200000 263679 212179 51500
1500000 356379 304879 51500
2000000 510879 459379 51500
2500000 665379 613879 51500
4000000 1128879 1077379 51500

80C:

The only change in this section is the addition of infrastructure bonds where you can claim benefit up-to maximum of Rs,20,000. (You can invest any amount in these bonds but for tax consideration only Rs, 20,000 will be considered) and hence you can save Rs.6,000 tax.

Note: According to budget report, Government only said long-term infrastructure funds. It is yet to clear what is long term and who is authorized for issuing these bonds. Whether the same old ICICI govt bonds or IDBI Flexi bonds to continue or not is not clear.

Wait till further news on this till April end. Do not buy infrastructure bonds till then.

NPS benefit:

NPS is National Pension Scheme, This scheme was extended to all citizens of India last year, but still it could not attract investors because of no agents involved, no tax saving, maturity amount is taxed.

But in this budget, FM announced that any individual from un-organized sector (those who are not central/state government employees) who opens NPS account in the financial year 2010-11 with minimal contribution of Rs.1000 and maximum of Rs. 12000; govt will contribute Rs.1000 for next 3 years.

That means govt will contribute Rs.3000 in total in your account.

Considering Direct Tax Code to come in effect from April 1, 2011 and NPS is placed under 80C. Most of the people will open NPS account, but they may not get Rs.3000 benefit. Hence it is a suggested to open NPS account this year and contribute minimum of Rs,1000. Later after the DTC, we can revise the tax planning.

Surplus money: How to make use of it?

  1. Rs, 51,500 per year mean Rs 4292 per month. Most of the people do not have enough medical insurance (Rs 15000 under 80D) this can be utilized this year to increase your medical cover.
  2. DTC do not have house loan interest and principal contribution benefit under 80C. Though DTC is not final in its present form, but one can use this surplus amount to pay towards Home loan. See increasing your EMI by this amount and reducing the term.

Though the single statement in budget affects every indivisual (directly or indirectly); above listed are some of the direct impact and strategy to make effective use of this.

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