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Aarati Krishnan

TIRED of reading about complex Budget proposals that run into reams of newsprint? Here, we have tried to lighten your load by outlining the impact of some offbeat Budget proposals that may affect you as a common taxpayer and consumer.

But, remember, the tax proposals will take effect only after the Budget is cleared by Parliament. The excise duty changes take immediate effect.

Tax savings on autopilot: Let us start with the good news. Did you know that a good portion of your tax saving investments could operate on autopilot, once the Budget proposals take effect? This is because the principal portion of your housing loan repayments, the tuition fees you pay for your children and the provident fund contribution deducted from your pay-check every month are listed as items eligible to be deducted from your income, before computing tax.

These items, along with several other savings instruments, will not be subject to any individual limits but will be capped at a total of Rs 1 lakh for the purpose of claiming exemption from tax.

This means that you need not wait, in nail-biting suspense, for the next "tax saving" or "infrastructure" bond offer to complete your quota of tax-saving investments for the year.

Higher studies at lower cost

Borrow more for higher studies: Tempted to pursue an expensive post-graduate course in management or science in one of top colleges in the US? You can now look at borrowing larger sums from banks or institutions to pursue higher education and deduct the entire interest paid on this loan from your income and lower your tax burden.

The limit of Rs 40,000 towards interest payments on education loans is no longer applicable. But, remember, this tax incentive is available only if you borrow to fund "graduate or post-graduate courses in engineering, medicine, management, maths, statistics and applied or pure sciences".

... and women

Less for women and senior citizens: The Budget has stealthily lopped off a part of the additional tax deduction that women and senior citizens are eligible to claim under the present tax law. Under the present system, women can claim an extra tax rebate of Rs 5000 on their tax dues, when compared to the normal salaried person.

Less generous to senior citizen...

Senior citizens are entitled to an extra tax rebate of Rs 20,000. But the Budget has done away with the entire concept of tax rebates and instead hiked the income exemption limit to Rs 1.25 lakh for women and to Rs 1.50 lakh for senior citizens.

In effect, the Budget allows senior citizens an additional tax break of Rs 5000; while women will have to make do with Rs 2500. This is certainly less generous than the extra rebates that were allowed for senior citizens and women till now.

Jewellery to cost more: The Budget may have made grocery shopping easier on your purse by reducing the excise duty on tea, edible oils, cakes and pastries.

Glitter at a price

But if your tastes run to more expensive stuff such as jewellery, then you may have to shell out more. The Budget has imposed a new 2 per cent excise duty on branded jewellery.

For good measure, it also defines branding as the "process of affixing any trade name or brand on the jewellery". As even small jewellers usually emboss their initials on their products to facilitate easy identification of their product, this excise duty could well cover most types of jewellery.

But don't let this deter you from investing in gold. You can still consider gold mutual funds, which have also been flagged off by the Budget (see related article on Page 11).

Prop to property prices: Prices of residential flats may climb further with the Budget bringing `construction of residential flats' into the service tax net.

The Budget says that contractors who build residential complexes housing more than 12 units will be required to shell out service tax at 10.2 per cent. You can count on them to pass on this tax to their customers.

Technically, apartment complexes which house less than 12 flats, and second-hand flats, should not see any price increase because of this move. But don't be surprised if realtors decide to use this opportunity to jack up property prices.

More people to file returns: Relieved that the hike in the exemption limits let you out of the tax net? Wait, for you may still have to file an income-tax return; for the Budget has tweaked the provisions relating to the filing of returns.

The basis for filing returns has been shifted from total income to gross total income.

This means that you will be required to file a return if your income for any year (from various heads such as salaries, profits and so on) is higher than the taxable limit of Rs 1 lakh.

The relevant "income" here is the sum you earn — before you knock off your tax savings, education loan repayments and other deductions allowed to you — which is the `gross total income'.

Earlier, you were required to file a return only if the portion of your income that is chargeable to tax (taxable income) exceeded the Rs 1-lakh limit.

The "one-in-six" criteria for filing returns have also been tweaked to leave out those who possess a cell phone.

Instead, you will have to file a return if your family is a power-guzzler, running up an electricity bill of over Rs 50,000 a year!

So, if you are not paying tax, maybe you should think twice about buying that air-conditioner just because it has become less expensive after the excise duty cuts!

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