Saturday, Apr 27, 2002
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By Our Special Correspondent
Apart from some excise concessions, the most significant measure announced by Mr. Sinha relates to tax exemption for the salaried class. Section 88 of the Income Tax Act, which earlier provided for a 20 per cent rebate on tax payable — and which was halved to 10 per cent in the original budget proposals for those with taxable incomes between Rs. 1.5 lakhs and Rs. 5 lakhs — will now attract a rebate of 15 per cent. But Mr. Sinha increased the ceiling of savings under this Section to Rs. 1 lakh a year from the earlier limit of Rs. 80,000, which means that a 15 per cent rebate amounts to a total benefit of Rs. 15,000. This is Rs. 1,000 less than the Rs. 16,000 rebate available earlier, but much higher than the Rs. 8,000 rebate proposed in the original budget presentation. But those with incomes above Rs. 5 lakhs would continue to be out of the rebate scheme, as proposed in the original budget. In increasing the savings limit to Rs. 1 lakh, the Minister has divided the component into Rs. 70,000 for specified investments such as in provident fund, small savings and life insurance premiums, and Rs. 30,000 for investment in infrastructure bonds which was earlier pegged at Rs. 20,000. Another widespread demand, also pushed by some BJP MPs, for restoring the higher interest on small savings did not find favour with Mr. Sinha. Being committed to a lower interest rate regime, he referred to the abolition of the investment limit of Rs. 2 lakhs in case of relief bonds for retired and retiring persons, including the provision of reinvestment of the proceeds of retirement benefits received earlier, as the avenue available for senior citizens to earn tax-free income but did not alter the interest rate structure. But a small concession was announced in case of dividends and income from mutual funds, except equity-oriented funds, in the hands of the recipients at rates applicable to them. The Minister announced that the tax on such income would fall under Section 80L of the Income Tax Act (pertaining to interest and dividend income) within the overall ceiling of Rs. 9,000 provided in that Section. Also, the 10 per cent tax deduction at source on this income would be applicable only if the amount received exceeds Rs. 1,000. The Minister also announced that subscribing to a telephone connection would no longer be a criterion for the one-by-six scheme under which filing of tax return is compulsory if a person fulfils any one of the six specified criteria. Subscribing to a telephone connection will now be substituted by the criterion of subscribing to a cellular telephone. About service tax on life insurance, Mr. Sinha made an announcement that this would cover only the risk premium part and this would be taken into account when the notification for this tax is issued. On the indirect tax front, Mr. Sinha announced some changes, particularly in respect of machine parts, marbles and granites, roofing material and textile industry. He also announced some concessions in postal rates for the publishing industry which would entail a loss of Rs. 7 crores in a year. But this amount would be made up through better fiscal management, he added. The Minister also made a point about taking a knock of Rs. 2,850 crores on account of giveaways by saying that out of a total revenue budget of more than Rs. 4,10,000 crores, this was a small amount which could be made up through appropriate savings. "This shows that the integrity of the budget remains intact,'' Mr. Sinha asserted but his critics were quick to point out that if the originally proposed measures had little financial implications, he could have avoided them in the first place and saved his party some political embarrassment in terms of electoral reverses.
Highlights 15 per cent tax rebate under Section 88 of Income Tax Act for those with taxable income between Rs 1.5 lakhs and Rs 5 lakhs. Savings/investment limit under Section 88 raised from Rs. 80,000 to Rs 1 lakh — Rs. 70,000 for specified investments and Rs. 30,000 for infrastructure bonds. Mutual fund income and dividends covered under Section 80L of I-T Act, up to a ceiling of Rs. 9,000 per annum. Tax deduction at source for mutual fund income only if it exceeds Rs 1,000. No change in small savings interest rates. Telephone out of 1/6 criteria for compulsory filing of income tax returns, cell phone included. Service tax on life insurance premium to cover only risk premium. Inland air travel tax exemption for flights from Andaman and Nicobar Islands, Lakshadweep and Leh.
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