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Saturday 17 March 2012

Give some, take more 

Give some, take more

Calcutta, March 16: Pranab Mukherjee has taken back much more than what he has given as relief to taxpayers.
The direct tax proposals are expected to cause a net revenue loss of Rs 4,500 crore. But the increase in indirect taxes because of the hike in service tax and excise duty is estimated to generate an additional revenue of Rs 45,940 crore. This means the government will be left with a net tax revenue collection of Rs 41,440 crore after the giveaways.
In such a skewed give-and-take, the hardest hit will be the salaried who, ironically, are among the most diligent taxpayers.
The finance minister has increased the basic exemption limit to Rs 2 lakh. While doing so, he has done away with the higher exemption limit allowed for women aged below 60.
The reduction in tax liability is somewhat moderate for those earning Rs 10 lakh or more a year. Tax saving for this income group is Rs 22,660 for men and Rs 21,630 for women per annum, respectively.
If you are male and have an annual income of Rs 10 lakh or less, you stand to save around Rs 171 a month under the new proposals. But this will be just enough to meet the impact of inflation (7 per cent) on a monthly grocery bill of Rs 2,452. If your bill is higher than this amount — in many houses it will be — your income tax gains from this budget will evaporate. (For women, the savings will be Rs 85 a month).
The hike in service tax, widening of taxable services and increase in excise duty will worsen the situation. Barring services under 17 heads, most day-to-day activities will attract a 12 per cent tax, up from 10 per cent.
If you are male and earn below Rs 10 lakh a year, your gain from the income tax relief will be negated the moment your bill for taxable services crosses Rs 8,583.50.
The finance minister has also increased the standard excise duty to 12 per cent from 10 per cent and merit excise duty (on select goods) to 6 per cent from 5 per cent. An increase in excise duty will immediately increase the prices of most manufactured goods.

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