New Delhi: If you are more than 80 years of age, Budget 2011-12 will cheer you up. You now have the unique status of having a tax category all to yourselves. You are called a very senior citizen and the tax exemption limit on income has been increased to Rs5 lakh.
If you’ve just hit 60, you’ve got a bit of a lucky deal this Budget for the age threshold that decides a senior citizen is now 60, instead of the current 65, and you have a tax-free income of Rs2.5 lakh.
Men below 60 will now have the basic zero-tax income at Rs1.8 lakh and women stay where they are at Rs1.9 lakh.
For individuals below 60
Income up to Rs1.8 lakh is exempt from tax from the current Rs1.6 lakh. This increase by Rs20,000 means you get to save Rs2,060 on taxes across income categories. This is below overall expectation that the limit would get hiked to Rs2 lakh.
“This increase in exemption limit has been marginal. We were hoping that the budget would increase the exemption limit to Rs2 lakh in order to usher in DTC,” said Homi Mistry, partner, Deloitte Haskins & Sells, an accounting and consultancy firm. “The savings in this case will be marginal for individuals.”
There are no changes for women below 60. They stay at Rs1.9 lakh of tax-free income.
Those between 60 and 80
Big changes for those aged between 60 and 64. Men in this age band will see a gain of Rs90,000 in the exemption limit. If your income is Rs3.7 lakh, post the new tax exemption and the deductions under section 80 C and section 80 CCF of Rs1.2 lakh, you pay zero tax.
This translates into a gain of Rs2,060 compared with the current tax liability. While Rs2,060 is the minimum gain, the maximum gain for you is Rs9,270. For those between 65 and 80, the exemption band increase is just Rs10,000 and translates into a nominal gain of Rs1,030.
Individuals above 80
This budget has the best offer for you. Not only do you now come under a new category called very senior citizens, your exemption limit has been increased from Rs2.4 lakh to Rs5 lakh. An increase by Rs2.6 lakh, this translates into a gain of at least Rs4,120 if your gross income is Rs4 lakh and a maximum gain of Rs26,780.
“It is a welcome step for senior citizens as they will now be able to manage their incomes better,” said G. Ramaswamy, president, Institute of Chartered Accountants of India. “These benefits will continue under DTC (Direct Taxes Code) as it will be difficult for the government to announce a tax incentive and then pull it away in a year from now.”
To be sure, while the gain is the maximum for individuals in this age group, some experts said not many will be able to enjoy the benefits. “Senior citizens typically don’t have incomes as high as Rs5 lakh or more,” Mistry said. “Hence, most senior citizens will not be able to enjoy the benefit of increase in exemption limit.”
Budget 2011 has retained the education cess on income tax at 3%. However, DTC proposes to do away with education cess. Even as the budget leaves some savings in your pockets, the proposals have belied the expectation of generous income-tax savings.
“This tinkering of exemption limits has been the biggest disappointment for me. This results only in minimal gains for the salaried class and offer huge gains to senior citizens who don’t earn so much,” said Nikhil Bhatia, executive director, PricewaterhouseCoopers. “The focus should have been to leave larger disposable income in hands of individuals.”
The new exemption limits will be applicable for calculating income tax for assessment year 2011-2012.