Budget 2012: Implications for the common man

Soumendra Mitra

The buzz in the air was that Finance Minister Pranab Mukherjee will go all out to steer the course of economy. As expected, he started his Budget speech with a lot of promise but what matters is the end. With experts dubbing it as a ‘80s-styled-Budget’, the intention of Mukherjee to put smile on the face of the investors and the aam aadmi raised a few big questions.

To call it as a cropper would be premature as his some of his proposals will certainly benefit the common man.

The following is a sneak peek of the year ahead for all of us.

In the Union Budget 2012-13, Finance Minister Pranab Mukherjee has given a marginal benefit on the much awaited Income Tax (I-T) slabs. The biggest beneficiaries would be people having income between Rs. 800,001 to 999,999 per annum. They move from the 30% slab to the 20% slab.

Personal income tax slabs

The basic slab for income tax has been proposed to be raised to Rs 2 lakhs from the current Rs. 1.8 lakhs. This leads to a savings of Rs 2,000 for all taxpayers earning between 180,001 to 199,999.

Moreover, the Finance Minister has created new tax slabs. So, if your income is between Rs. 200,001 and Rs. 500,000, your tax rate will be 10%. For people earning Rs. 500001 to Rs.
10,00,000 -- the tax rate will be 20% and for people whose income is Rs. 10,00,001 and above the tax rate is 30%.

The Finance Minister has also said that taxation of unexplained money, credits, investments, expenditures etc, will be at the highest rate of 30%, hence this section will not be covered under any income tax slab.

5000 Rupees exemption

Pranab Mukherjee has proposed to give a deduction of Rs 5000 for expenses incurred on preventive health check-up. Now you can get a tax benefit if you visit your neighborhood hospital for a health check-up.

Incentive for investing in equities

The Union Budget 2012-13 proposes a new scheme named Rajiv Gandhi Equity Savings aimed at encouraging flow of saving in financial instruments and improving the depths of domestic capital market.

The Scheme is being introduced to promote equity investments. It will get I-T deductions, which will be purely applicable to the new retail investors who will invest directly into equity up to Rs. 50000, with a lock-in period of three years. The investor's annual income should not exceed Rs. 1,000,000.

In order to ensure more participation from small towns in IPOs, the FM has announced that changes have been made in the IPO guidelines. The exact guidelines have not been mentioned yet. However, this will help the capital markets in the long-run and even your neighbour share broker who can now look at rural India in a big way.

Tax free bonds

The Finance Minister has proposed to allow selected government undertakings to issue tax-free bonds of Rs 60,000 crore, which is double the amount assigned in the previous year.

Boost for low cost housing

Finance Minister Pranab Mukherjee announced various majors for mitigating shortage of housing for low income groups.

To ensure improved flow of institutional credit for housing loans the proposal of allowing External Commercial Borrowings (ECB) for low-cost affordable housing projects and setting-up of a Credit Guarantee Trust Fund is a good news for those, who belong to the lower rung.
Save, earn interest and prosper

The Budget proposes to give a tax deduction of up to Rs 10,000 on interest earned from savings bank accounts. This means you can park up to Rs 2.5 lakh continuously in your savings bank, get interest which is currently 4% in most banks and not worry about the interest getting taxed.

Ease on education loan rates

The setting up of Credit Guarantee Fund, mentioned in his speech, is likely to reduce the risk of banks. For that reason, the banks might reduce the rate of interest on educational loans leading to you paying less interest after landing up in a job.

Nothing much for Luxury product lovers

This is clear bad news if you happen to be a jewellery lover as an excise duty of 12% has been levied on branded retail garments.

The customs duties on the silver and gold prices have gone up to 4% from 2%. This will make both gold and silver costlier than what they are today. However, the branded silver jewellery is fully exempted from excise duty.

The excise duty on big cars, which at present attracts duty based on their engine capacity and length, has gone up from 22 percent to 24 percent.

While presenting the Budget, the Finance Minister proposed that in the case of cars that attract a mixed rate of duty of 22 percent plus Rs 15,000 per vehicle, the duty would go up and switch over to an ad valorem rate of 27 percent. This will disappoint people who were planning for the prices to fall post budget.

Cheers for the mobile buyers! The custom duty on LCD and LED panels has been exempted. In addition, the mobile phone parts are exempted from basic customs duty, which is expected to bring down the price of mobile phones.

Housing loans

The Interest subvention of 1 percent has been extended for one more year on housing loans up to Rs 15 lakhs. The Finance Minister has also announced that a Credit Guarantee Trust Fund is to be set up to ensure better flow of Institutional Credit for Housing Loans.

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