The Hindu Business Line : A date with the rates

The rates of tax proposed for individuals, Hindu undivided families (HUFs), association of persons (AOPs) and body of individuals (BOIs) are as shown in Table 1.

In the case of women not being senior citizens and who are residents of India, the tax rates will be as given in Table 2. And in the case of senior citizens being resident of India, the rates will be as given in Table 3.

These rates would go up by a surcharge of 10 per cent if the total income exceeds Rs 10 lakh (for all categories).

The additional surcharge of 2 per cent to fund education will continue and apply irrespective of the total income.

This would mean a general reduction in the rates of tax. However, senior citizens would stand to lose marginally since the rebate under Section 88B will not be available to them and under the law as at present, they would pay no tax if their total income were up to Rs 1,53,000 while under the proposal they would pay a tax or Rs 600 if they have a total income of Rs 1,53,000.

The rate of tax for domestic companies is proposed to be reduced from 35 to 30 per cent. The surcharge is proposed to be increased from 2.5 per cent to 10 per cent.

The additional surcharge of 2 per cent will also continue to be applicable. These rates will apply to a partnership firm as well. In case of co-operative society or local authority, the surcharge will not be applicable. The rate of tax in respect of foreign companies will remain unchanged.

Query

What are the deductions that would be available?

Reply

There will be no standard deduction on salary available from assessment year 2006-07. The other deductions available under Section 16, namely, entertainment allowance (for Government employees) and tax on employment, will continue to be available.

The rebate under Section 88 is proposed to be withdrawn and in its place a deduction is sought to be introduced with the introduction of a new Section 80C. This deduction will be permitted from the gross total income of an individual or HUF in arriving at the total income.

The overall deduction that is permitted under this section in computing the total income is a sum of Rs 1 lakh.

The deductions

Entertainment allowance (available only for Government employees).

Profession tax.

Interest on home loans (limit: Rs 1,50000, if the property is self-occupied).

Payments and contributions, such as LIC premium, PPF, NSC, principal repayment of housing loan and tuition fees for children, subject to a limit of Rs 1 lakh.

Contribution to a pension fund of the LIC or any other insurer (limit: Rs 10,000).

Medical insurance premium (limit: Rs 10,000).

Medical expenditure, including rehabilitation of a physically handicapped or mentally retarded dependent relative or on deposit in approved scheme of LIC or any other insurer or UTI (limit: Rs 50,000).

Medical expenditure on treating certain diseases and ailments of a dependent relative (limit: Rs 40,000).

Interest on loan taken for higher education without any limit for a period of eight years.

Donations to specified funds such as Prime National Relief Fund and charitable trusts.

Rent paid in case exemption of house rent allowance has not been utilised.

Deduction to assessees suffering from permanent physical disability or mental retardation (Rs 50,000).

One-third of family pension or Rs 15,000, which ever is lower.

Mail your queries to taxtalk@thehindu.co.in or by post to Tax Talk', Business Line, Kasturi Buildings, 859, Anna Salai, Chennai-600002.

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