Union Budget 2012 Analysis for Aam Aadmi

Posted in Finance Articles, Total Reads: 4452 , Published on 19 March 2012
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Union budget 2012-13 was presented by Finance Minister Pranab Mukherjee in Lok Sabha on 16th March, 2012. In his speech, the finance minister acknowledged that there is need to achieve fiscal consolidation, curtail subsidy burden and revive private investments. On the whole, the finance minister has set more realistic targets than he had in the previous year but perhaps he may have missed out the last opportunity before general election to take bold policy decisions.



DIRECT TAX

The finance minister has given marginal income tax relief to the common man by increasing the income tax slabs from Rs 180,000 to Rs 200,000.

INCOME TAX RATES

INCOME SLAB

Resident very senior citizens (>80 years)

Resident senior citizens (>60 years)

Resident women

(<60 years)

Others

Upto Rs. 200,000

Nil

Nil

Nil

Nil

Rs. 200,001 to 250,000

Nil

Nil

10%

10%

Rs. 250,001 to 500,000

Nil

10%

10%

10%

Rs, 500,001 to 10,00,000

20%

20%

20%

20%

Above Rs 10,00,000

30%

30%

30%

30%

Age limit of senior citizens is proposed to be reduced from 65 to 60 years.

INCENTIVE FOR INVESTING IN EQUITIES

Rajiv Gandhi Equity Saving Scheme aimed at encouraging flow of savings in financial instruments and improving the depths of domestic capital market has been introduced. As per this scheme retail investors with income below Rs 10 lacs will be allowed Rs. 50,000 deduction on investments in equities.

EXEMPTION ON PREVENTIVE HEALTH CHECK-UP

Pranab Mukherjee has proposed to give a deduction of Rs 5000 for expenses incurred on preventive health check-up. Now you can get a tax benefit if you visit your neighborhood hospital for a health check-up.

HOUSING LOANS
The Interest subvention of 1 percent has been extended for one more year on housing loans up to Rs 15 lakhs. The Finance Minister has also announced that a Credit Guarantee Trust Fund is to be set up to ensure better flow of Institutional Credit for Housing Loans.

EDUCATION LOAN RATES
The setting up of Credit Guarantee Fund, is likely to reduce the risk of banks. For that reason, the banks might reduce the rate of interest on educational loans leading to a lesser interest outflow.

LOW COST HOUSING

To ensure improved flow of institutional credit for housing loans the proposal of allowing External Commercial Borrowings (ECB) for low-cost affordable housing projects and setting-up of a Credit Guarantee Trust Fund is good news.


INTEREST ON SAVINGS BANK ACCOUNT

The Budget proposes to give a tax deduction of up to Rs 10,000 on interest earned from savings bank accounts. This means you can park up to Rs 2.5 lacs continuously in your savings bank, get interest which is currently 4% in most banks and not worry about the interest getting taxed.

INDIRECT TAXES

The budget proposes steps to boost revenues by rolling back fiscal stimulus (a 2% hike in both excise duty and service tax) and expresses intent to limit the subsidy bill to 2% of GDP. This will have a negative impact as the prices of goods and services are set to rise by 2-5%. The consumer will have to shell out more for cars, jewellery, eating out, hotel accommodation and other consumer durables among others.

CHEERS FOR THE MOBILE BUYERS

The custom duty on LCD and LED panels has been exempted. In addition, the mobile phone parts are exempted from basic customs duty, which is expected to bring down the price of mobile phones.

For the AAM AADMI though the finance minister has given a relief of Rs 4,500 crore in Direct Taxes but an additional burden of Rs 45,000 crore has been put through Indirect Taxes. On the whole the budget has failed to bring a smile on individual taxpayer’s face.

This article has been authored by Bhavin Chotai



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