Friday, August 21, 2009

How the new tax code will affect you

The biggest point of discussion has been the rise in the income slabs. While retaining the basic exemption limits at Rs 1.6 lakh (for individuals), Rs 1.9 lakh (for women) and Rs 2.4 lakh (for the retired), the slabs have been hiked substantially.

Along with this, the limit of Section 80-C, which has been renamed Section 66, has been hiked from Rs 1 lakh to Rs 3 lakh. For someone earning say, Rs 14.5 lakh per year, the new numbers could look something like this: Rs 1.6 lakh (basic exemption) Rs 3 lakh (savings under Section 80C/ Section 66) Rs 9.90 lakh taxable income Tax rate for Rs 10 lakh = 10 per cent Tax liability = Rs 99,000.

Looks fantastic? But it's not that simple. For a salaried person, who gets house rent allowance, medical and other perks, he/she will not get tax benefits anymore. In fact, the value of rent free or concessional, leave travel allowance, earned leave and medical reimbursement, etc will now be included as a part of the salary.

Vikas Vasal, executive director, KPMG, says, There were certain prerequisites that an employee enjoyed in his salary. All the perks in the direct tax code are brought under the tax net. This means the taxable income will now be higher.

To read more, please, visit Rediff

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