The Hindu Business Line : The personal tax angle

Every time a Budget is presented, a question that arises is: Who gains and who loses? This time round, let us analyse the impact of the measures announced in Budget 2009 by the Finance Minister?

The saving is minimal for those with incomes less than Rs 5 lakh. The removal of surcharge has benefited higher income earners.

The feeling is inescapable that the rich will get richer. The bias in favour of the elite is also reflected in duty exemption for branded gold jewellery even as other jewellery, normally bought by the middle-class, is subjected to higher excise duty. The wealth tax exemption limit has been doubled from Rs 15 lakh to Rs 30 lakh.

In the past four years, the salaried class has been discriminated against. Deductions are available for all income earners against their gross receipts. Barring rebates and deductions for provident fund, insurance etc., with a ceiling of Rs 1 lakh, the salaried class gets no other deduction.

There was disappointment writ large on the faces of salaried taxpayers at the failure of the Finance Minister to restore standard deduction. They are treated on a par with professionals and business people.

The Finance Bill has raised the exemption limit for senior citizens to Rs 2.4 lakh from the assessment year 2010-11. Section 88B was in the statute book till it was omitted by the Finance Act, 2005 w.e.f. April 1, 2006.

A relief of Rs 20,000 was allowed to senior citizens under the old Section 88B. That was much bigger than the relief now doled out by way of higher exemption limit.

They deserved a better deal from the Government in their old age.

Section 80DD

Section 80DD was substituted by Finance Act, 2003 w.e.f. April 1, 2004. It has been in the statute book from April 1, 1991, onwards.

The Section allowed deduction for an individual or an HUF in respect of expenditure incurred for medical treatment, including nursing, training and rehabilitation, of a disabled dependant, of a sum of Rs 50,000 from the gross total income.

In respect of a person with severe disability, the deduction was Rs 75,000. The Finance Bill enhances the deduction to Rs 1,00,000 in respect of dependant with severe disability.

There is no announcement about a similar enhancement for those with disability that is not severe.

They will continue to get deduction of Rs 50,000.

Section 80E

This Section applies only to individuals. There is no reason why it should not be applied to HUFs. It allows deduction of interest paid on loans taken for pursuing higher education. The loans should have been taken from a financial institution or from an approved charitable institution.

The purpose should be pursuit of higher education in specified fields of study. It has been in the statute book w.e.f. April 1, 1995, in some form or other.

Clause 32 of the Finance (No. 2) Bill amends the definition of higher education. Hereafter, higher education will mean any course of study pursued after passing the Senior Secondary examination. This is welcome. The objective appears to be to foster human capital formation in the country.

The amendment extends the scope of Section 80E to cover even vocational courses pursued after passing the Senior Secondary examination or its equivalent.

As for education loan, a part of the principal amount could have been considered for deduction in every assessment year.

(The author is a former Chief Commissioner of Income-Tax.)