New income tax slabs and its Impact on Common Man’s financial life

POSTED BY manish ON February 26, 2010 COMMENTS (152)

Finance Minister Pranab Mukherjee on Friday announced revised tax slabs for individual tax payers and also said that the New tax rates would offer relief to 60 per cent of taxpayers.

But looking at the below comparison between the tax payable last year and the proposed one it seems that the so called “Aam Aadmi”, the middle class would not be gaining so much tax benefits as there are absolutely no tax savings for the person earning up to Rs. 3 lakh p.a. and those who are earning up to Rs. 4 lakh would end up saving only Rs. 10,000.

income tax slab

New tax slabs would benefit greatly to the higher middle class as compared to the Aam Aadmi, though the additional investment of Rs. 20,000/- in the infrastructure bonds would provide some relief especially to those who are interested in traditional savings tools.

Introducing Saral-2 form back is a good initiative and would make it more Saral for the tax payers to file their IT returns without hassle as the current ITR are not easy for the taxpayers to prepare & file on their own.

In order to make tax compliance process more efficient two more CPCs (Centralized Processing Centre) are proposed to be set up apart from extending โ€œSevottamโ€ a pilot project at Pune, Kochi and Chandigarh to four more cities in the year. Sevottam provides a single window system for registration of all applications including those for redressal of grievances as well as paper returns.

Long awaited increase in the limits for turnover over which accounts need to be audited is also enhanced to Rs. 60 lakhs for businesses and to Rs. 15 lakhs for professionals as compared to the existing limits of Rs.40 lakh and 10 lakh respectively.

Tax Slabs for 2010-2011

The basic threshold limit for income tax exemption will remain at Rs.1.60 lakh. Under the new proposal, 10 per cent tax will be levied between Rs.1,60,001 and Rs.5,00,000, 20 per cent on incomes between Rs.5,00,001 and Rs.8,00,000 and 30 per cent above Rs.8,00,000.

Apart from this you also get Rs 20,000 additional Tax benefit if you invest in long term Infrastructure Bonds.

Tax Slabs

OLD NEW TAX RATE
Upto Rs.1.6 lakh Upto Rs.1.6 lakh NIL
Rs.1.6 – 3 lakh Rs.1.6 to 5 lakh 10%
Rs.3 – 5 lakh Rs.5 to 8 lakh 20%
ABOVE Rs.5 lakh ABOVE Rs.8 lakh 30%
Tax Slabs
OLD NEW TAX RATE
Upto Rs.1.6 lakh Upto Rs.1.6 lakh NIL
Rs.1.6-3 lakh Rs.1.6 to 5 lakh 10%
Rs.3-5 lakh Rs.5 to 8 lakh 20%
ABOVE Rs.5 lakh ABOVE Rs.8 lakh 30%
  • Exemption Limit for Women : 1.9 Lacs
  • Exemption Limit for Senior Citizen : 2.4 Lacs

How Much do you Save because of New Tax Slab?

Income

Old Slab

New Slab

Your Savings

60,000 0 0 0
3,00,000 14,000 14,000 0
4,00,000 35,020
24,720
10,300
5,00,000 55,620
35,020 20,600
6,00,000
86,520 55,620 30,900
7,00,000
117,420
76,220
41,200
8,00,000
148,320 96,820
51,500
9,00,000 179,220 127,720
51,500
10,00,000
210,120 158,620
51,500

What are your comments on New Tax Slab ? How is it going to Impact you?

This is a guest article written by Mr. Rishabh Parakh who is a Chartered Accountant and Director at MoneyPlant Consulting he had been contributing to leading newspapers like DNA & NavBharat (Money Plant Consulting is a premier outsourcing & a financial services provider which aims to offer solutions for all your financial needs and queries.)

Get FREE call back from Jagoinvestor Team

First Name*
Email*
Mobile*
City*
Yearly Income*
Time to Talk*
Which Package*
Your Requirement
Lead Source
Lead Status

152 replies on this article “New income tax slabs and its Impact on Common Man’s financial life”

  1. Sukhmani says:

    Hi Manish,

    I have a question. How many indians in age group of 20-29 earn upto 3 Lakhs.

    Thanks,
    Sukhmani

  2. bose says:

    Hi Manish,

    I have a question on House/Property income or loss!

    Any idea on how to make use of this provision as I have recently taken a home loan and had got it renovated(repairs went to around 4 lacs ). Please let me know if I can declare this as loss on the currently letout property

    Warm Regards,

    Bose K

  3. Suhas says:

    Hi Manish,

    Does the Bond issued by NHAI (http://www.nhai.org/bonds1.html) fall under the 20000 bucket ?

    Thanks
    Suhas

  4. PRADEEP KUMAR BASAK says:

    Dear Manish,
    Hello, I am a reader of your blog since last one year, really you are doing a great job by educating, advising,aquainting,cautioning & by every possible means to people. By educating people they at least are saved from so many “financial Thugs” now a days !!. By proper advising to people regarding their financial problems you are again doing a wonderful job. My all hearty & warm wishes to you always.I cannot express my word of thanks, that you are doing a great help to humanness directly & indirectly. My salutes again!!!!!

  5. Srinivas says:

    @Anoop,

    Then it is just Broadcom (your employer) decision to avoid employees submitting fake rental receipts.
    ๐Ÿ™‚ if owner refuses; then better to change flat…:) or company ๐Ÿ™‚

  6. Deepak Gupta says:

    Manish and other friends,

    What is NPS and DTC ? Can any one explain more in detail or some useful links for those terms ? I know I can google but if there are any recommended readings …

    Thanks,
    Deepak

  7. Jitendra Solanki says:

    Hi,

    Lot of Discussion about DTC and its after effect.

    We in india live heavily on subsidie sprovided by teh government.Yestearyears,We were on Fixed guaranteed returns by teh government which is almost vanished now.Then ther are subsidies on Petrol,LPG,Food and many others.
    Indirectly there is also a subsidy on Tax Benefits to promote savings.This is EEE which means everything we save and get in return is tax Free.Due to this in India savings rate is very high or i can say the highest.
    To cut subsidies in savings the option isEET which i beleive will be the future.our Honourable FM has very well clearly indicated of Moving to thsi structure but gradually.
    We are afraid today because we have heard about the commitee recommendation given for DTC.I believe, like you and me our FM also knows if it is implemented as it is, it will kill everything.So my thinking is -it will be implemented but with modifications and keeping the high saving rate of indians in picture.
    As far this budget goes its a well drafted budget with all reforms kept in mind.
    Salaried class will surely get benefits by High Disposable income.Yes price rise or inflation is a concern and that FM has very well indicated by giving a fiscal Deficit target.Lets give some more time to him.

    1. Jitendra

      Why do you feel that DTC will destory everything .. I think it will not be that bad . yes the initial reaction may look bad and things will be heated in the start , but simplification in tax structure and high income through less taxes will help things somewhere ๐Ÿ™‚

      Manish

      1. jitendra solanki says:

        Manish,

        What i mean was the recommendation from teh commitee has to be implemented with some modification.Because if its implemented as suggested it will be very harsh on small investors.Thsi our Hoonourable FM knows ant thats why the changes in tax structure has been done.May be we will see more bonanza from him before DTC is implemented.

        1. Jitendra

          Yes , i am sure it wont be possible for DTC to come in its original form , there has to be some big modifications ๐Ÿ™‚ .

          manish

  8. Sathya says:

    If the said DTC comes into effect, i will b left with no option but to leave India….
    :D:D:D

    1. Why man .. why such a big change ? ๐Ÿ˜‰

      Manish

  9. Anoop says:

    I think if govt comes with some plans where you can invest limited amount and it will be tax free at maturity in the long run will be good. Like PPF, you can invest only 70K and lock in period 15 years.

    Or it could be like long term investment will be tax at lower rate like 10% or so. Right now what DTC stands is the we have to pay 30% tax on all long term investment as it will add our income to more than 25Lakh for sure. Even withdrawal according to the income slab will not help. or they can tax according to the slabs. Though it no longer remain simple then.

    This will also help as we dont have any social security schemes.

    -Anoop

    1. Anoop , but we will also have more income now and more saving , so if we were having Rs 100 which was not taxed then after DTC comes , we will make more money like say 130-140 and then when we pay 30% on it .. again we will have same 100 .. little bit plus or minus

      Manish

  10. Krishna says:

    Hi,
    Manish
    I think removing the ELSS from 80C in DTC will have negative effect on market as people will not be interested to invest as they do not get any tax benefit even if they do invest. Then our options are limited either you have to apy tax else invest in Govt funds like PPF,LIC where we will get very low returns. Then financial Planning would be mess.What’s ur opinion on this?

    1. Krishna

      Even PPF will go away from 80C , we will have only NPS , life insurance premiums ๐Ÿ™‚ under sec 66 which will replace 80C and we will get 3 lacs exemption. This is impact things badly , correct ..

      Manish

      1. Srinivas says:

        @ Manish,
        No, PPF is still part of 80C.
        According to DTC, 80C includes PPF, NPS, Life insurance premiums, Super-Superannuation and Provident Fund (EPF) but maturity amount is taxed for all of these.

        1. Err .. my bad .. i got confused !! You are right

          manish

      2. Krishna says:

        Hi,
        Manish,
        Then people have to rely on Endowment Policies of LIC to get tax benefit and even maturity amount will be taxed from that ,in that case you wont get atleast 5-6% return on money invested which is absurd ,there by Govt is making Middle class people life miserable.

        1. Srinivas says:

          Yes. DTC introduces EET, With this, one cannot avoid tax but can postpone paying tax.

          we can mainly depend on PPF, NPS for tax saving and of course PF is anyway default.

      3. Anoop says:

        It is like you do the debt part from the tax exempted limit of 3 Lakh like NPS, PPF etc and equity from MFs. I think section 80c is no longer there.

        It could also be that new product will come into picture to give the max benefit. Secondly the focus of DTC is not on giving Tax saving incentives but to give money to the earner and let him spend and invest.

        – Anoop

        1. Krishna says:

          Anoop
          I agree with your point.But my conecern is you have very limited options for investing with Products like EPF,NPS.Lets see does the govt.launch new schemes with better returns

        2. Anoop 80C is there at the moment , but it will go away and sec 66 will come ๐Ÿ™‚

          Manish

  11. Ramesh says:

    Hi Manish,

    I am paying around 1,30,000 as home loan interest but I rented it out and getting around 1,20,000/annum. How this impact in my new direct tax code if they take the home loan interest from tax deductions.

    1. Ramesh

      You will not get tax exemption of 1.3 lacs and your rent will be taxed as its income .

      manish

      1. pattu says:

        My understanding is:
        New tax code eliminates benefits for self occupied properties only. Rented properties can be used for tax purposes in the usual way.
        See

        There are several other articles on this.

        1. Pattu

          yes , thats correct … Tax exemptions on rented house will still be there ๐Ÿ™‚ . So now , does it makes sense to buy a house on loan , give on rent and live in rented apartment ๐Ÿ™‚

          manish

          1. pattu says:

            Yes it is bad for people paying EMI on self-occupied property. However there will be some opposition to this and hopefully the benefits will stay

            1. Pattu

              I think big real estate companies and Big builders will not let this happen through internal contacts , else it will badly impact their margins ๐Ÿ™‚

              Manish

            2. Anoop says:

              I think benefit has to be there and more so it should be for the right person and right reason. India gives full interest benefit to the rented house and limited tax benefit (1.5 L) for self occupied house. This is ridiculous. This is a great conspiracy of govt and realtors.

              If the vision is that every family or person has atleast one house. Then we should encourage people to buy and stay in it. And give the tax benefit on those house only. House bought for investment (like second and more or not rent ones) should be taxed differently or no tax benefits. They should also be charged more interest rates for second house. This will remove speculation and will create genuine home owners and we can hope one house for one family at a reasonable cost.

              Recently I read an article that China has tightened its norm for real estates. There people buying second home have to give more down payment (40%), more interest rates. Norm for lending for banks also made stricter.

              We should also be like that. I feel that with so population and with less land, making real estate so much attractive option is unnecessary. It will be beneficial but speculation has to go away for everyone to have one atleast.

              We are in need of real estate reform badly. But that will never happen. After it is biggest source and sink of black money in india and money generator for politicians.

              -Anoop

  12. Chandu says:

    Hi all,

    Completely agree with Manish that new tax rebates will only benefit higher middle class. In my opinion, A person who gets a salary of Rs 1,00,000 per month have to pay
    Rs 1,20,000 under new tax considering HRA/Home Loan exemptions and 80C investments which is just 10% for him. I consider people who get more than Rs25,000 per month as higher middle class. Govt should get more tax rebates for people who get less than 25,000 which will definitely increase the consumption as well.

    In my view,
    Basic exemption of tax should be increased without scope for medical bills, conveyance allowance or HRA. In my view, all fake bills should be avoided.
    Home loan should be viewed as a long term investments which will come under 80C.

    In other ideal view, non-salaried class are the ones who evades tax more. So every transaction or bill should quote PAN no which will pave way for more trasparency

    1. Chandu

      Nice ideas , How come home loan is in 80C after direct code tax ? It will be taxed once New tax code comes into picture ๐Ÿ™‚

      manish

      1. Srinivas says:

        yes. tax evasion is the main problem in India. Govt should use PAN in all transactions and make it computerized.
        1. If we declare HRA then we should give PAN number of the Owner, Rent must be paid in non-cash mode and employee must submit bank statement for HRA claim;
        in any case, if we tamper rent then more tax for owner.
        2. Link all bank’s database to deduct TDS appropriately, Now people park money in different bank branch to evade tax.
        3. I have never see any body adding interest earned from NSC during tax filing; At least IT dept can detect from the tax collected from the particular PAN what is high income group and add NSC interest and deduct tax. The software must be made intelligent to add these.

        Most of the people took home loan to serve home need and tax purpose, those will be hit by DTC. Govt justification is having raised tax slab till 10L will work out. but industry and opposition parties argues for not moving home loan out of 80C.
        Mr.Pranab also promised to consider the option saying “Having a home” is a big dream for the middle class citizen of India.
        Need to wait and watch

        1. RISaHBH parakh says:

          yes,

          tax evasion is the biggest problem as mentioned in my earlier comment, really dont know why govt is not taking actions against small & medium business class people as against the salaried class.

          Srinivas you are absolutely right that people are not adding NSC int. but that is also not known to them the real wonder lies in bank interest and each and alomost every one is deriving income may be most nominal amount say 500 to 1000 bucks but as per IT act and after the abolition of sec. 80L entire interest income from all the bank accounts held should be added to total income and tax has to be paid thereon.

          till date in last four years i have filed around 30000 tax returns and hardly .01% people had declared the interest and paid the tax thereon (inspite of informing them) reasons are:- since every body else is not declaring they also dont bother and Govt too is not taking any action against them as i think the cost of collecting the same must be more than their revenu ๐Ÿ™‚

        2. rishabh parakh says:

          yes,

          tax evasion is the biggest problem as mentioned in my earlier comment, really dont know why govt is not taking actions against small & medium business class people as against the salaried class.

          Srinivas you are absolutely right that people are not adding NSC int. but that is also not known to them the real wonder lies in bank interest and each and alomost every one is deriving income may be most nominal amount say 500 to 1000 bucks but as per IT act and after the abolition of sec. 80L entire interest income from all the bank accounts held should be added to total income and tax has to be paid thereon.

          till date in last four years i have filed around 30000 tax returns and hardly .01% people had declared the interest and paid the tax thereon (inspite of informing them) reasons are:- since every body else is not declaring they also dont bother and Govt too is not taking any action against them as i think the cost of collecting the same must be more than their revenue ๐Ÿ™‚

          1. Rishabh

            the main reason why people dont declare FD interest is the awareness part , people are amazed to hear that its taxable, second part is lazyness to declare it .

            What are the penalty for this ?

            manish

            1. NKanani says:

              Talking about HRA, if actual bills are made mandatory, then, i guess, lot of us will have to move at different places – since most of the owners would not be willing to consider ‘rent’ as a taxable income – worst still, we wont get rented houses, OR, they would give bills only of the amount that they could manage as “income” from house rent!

            2. Nehal

              Even now , Actual bills are mandatory !! .. people who give some other bills signed by someone else other than owner are not submitting right documents .

              Manish

            3. Anoop says:

              But the main problem is that now you have to give the PAN is mandatory with the reciept from next year. It means that receipts should be original not fake. Question is will owner will give you that?? My owner gave me some crap reason not to have a PAN.

              If I change flat now, then i will have to talk about this also – Receipt with correct rent and PAN duly signed.

              Regards,
              Anoop

            4. Anoop

              Ohh .. I didnt have clear idea on this .. So from next year things are going to change..

              surprise surprise .. Govt got sensible/logical !! ..

              manish

            5. Srinivas says:

              @Anoop

              Though submitting PAN number of the owner is good, But I do not think govt can implement is so fast.
              Can you point me where you read about this? I did not find it in DTC document

            6. Anoop says:

              I did not read about it. In my company (Broadcom), the Account asked for it. They gave us this format. He also told me that from next year it will be compulsory.

              So I just thought it is better to ask the owner in advance. Google did not show any result when i tried to search. Only issue will be that our company should accept the receipts we give them and don’t cite the rule as this is not approved by IT so we cannot take it.

              Regards,
              Anoop

            7. Nkanani says:

              Hi Manish,

              The actual bills are mandatory, but very few of the employees submit actual bills. And some owners do not accept cheques – they need just cash. Third, PAN number quoting is very difficult – i have changed around 4-5 houses, and never found an owner who is willing to give his PAN number.

  13. Anoop says:

    Hi Manish,

    It seems that everyone is well convinced that DTC is cominng for sure. I feel there have many attempts in the past to reform Taxes but failed. Though the FM said in the budget but so far there was no discussion in the parliament and there is no such date planned to do so. Until it is not done in the parliament and if it is done then other political parties will let it pass in the same form, that has to be seen. Not because of govt majority but public defame by the opposition, govt may have to change. BJP already raised some issues, and Left and other will say that it is not for common man it is for HNI, and other high class guys.

    I think everyone was thrilled with the propect of less tax but many (not all) ignored the fact we will be moving to EET. So the questions is will it help us as a common man?? Because many talk about EEE for the govt sake as it is not possible for the govt to do by putting pressure on the coffers. But what about the common man. For example right now I save some X ammount in MF SIPs keeping target Y in my mind as capital gain is not taxed. If DTC comes in to picture, then my target needs to be reset to some Y+Z as the total amount will be taxed and i got to add more to my total saving amount X. Say that is P. Now if with the DTC in place, I get P atleast then it is ok, otherwise I am at loss.

    Secondly, it sovles the problem of simplication of taxes but does not solve the problems of
    – incresing the Tax base
    – Tax evasion. it hopes that low taxes will eliminate the problem. Is that true?? There are so citation of statistics. Bad habits die hard. People dont want to pay. For many 10% will be more and they want to hide. I think the problem of tax evasion is more in business than salaried class. Mostly corrupt people need to hide as they can not declare it (problem is different).
    – Will not solve the corruption

    I feel with existing laws, if tax evasion, better tax base and black money issues are solved, we can move to lower tax regime.

    So lets see. DTC might remain in dreams, and we should not be surprised.

    You might read different take http://new.valueresearchonline.com/story/h2_storyview.asp?str=101262

    Regards,
    Anoop

    1. Anoop

      I agree that DTC is still in dreams and its not that smooth for it to come ..

      lets see how things goes, overall as you said benefits would be taken over by Tax at maturity ๐Ÿ™‚

      Manish

    2. rishabh parakh says:

      Positives about EET ๐Ÿ™‚

      yes there are many negatives as discussed about EET regime which is the favourite method of Governments to tax citizens worldwide.

      EET will remove almost all the tax-free investments from the market. EET will bring in awareness to make investments with a purpose of creating wealth not just to save tax. In that way, EET is positive. Till date, in spite of the financial reforms happening for the past 15 years, Financial Planning in India:) = Tax Planning. This has been brought about because of the EEE regime.

      Equating tax planning with financial planning has lead to financial disasters. Insurance Plans have been taken without life cover or adequate cover! Many business people have shown lower income in their tax returns. The list goes onโ€ฆ The effects of all these are to save on tax but lose out on wealth.

      The opportunity is being now created to get out of โ€œSaving Tax Modeโ€ and get into โ€œCreating Wealth Modeโ€.

      1. rishabh parakh says:

        hi All,

        what do you think about this (& the only one, may be) positive:) site of EET???

      2. Rishabh

        Postive side for Product sellers ๐Ÿ™‚ . its like a trap .

        If some product A comes under TEE and other comes under EET , even tough the long term returns from A is higher than B , There would be 10 times more selling of B type products because of the same issue which you mentioned , Tax planning = financial planning ๐Ÿ™‚

        manish

        1. NKanani says:

          As mentioned by Anoop, it will be a disastrous effect to have EET for products which have been EEE. This will actually increase money with the govt. and also increase the corruption (since govt. would not want to pass the benefits of tax back to tax payers!). We as individuals would rather be better off without DTC, at least we can depend on EEE investment instruments (PPF, ELSS, etc.)

          1. NKanani

            I think we are not seeing DTC in right way .. we are forgetting that we will also have high tax saving because of DTC , overall there will be a class that will benefit too . Apart from this .. lets wait for the time . DTC might come , but there will be many changes I believe .

            manish

  14. pattu says:

    Eishah, Srinivas,

    I have NPS as I am central govt servant. Its design of equity:debt ratio is pretty good.
    50 equity upto age 3 and equity decreases every year upto 60 when it hits 10%
    For a non-govt servant there may be processing fees involved and for them its like a cheap ULIP.
    See here for instance
    http://businesspandit.wordpress.com/2009/07/14/nps-not-cheap/
    http://ibnlive.in.com/news/new-pension-scheme-dont-invest-yet/92660-15-p1.html

    For a govt servant its a good scheme better then EPF However there are some disadvantages. If they deduct X from my monthly salary towards NPS, govt contributes X. My total taxable salary per month = salary+X.
    IN my case 2X times 12 exceeds Rs. 1 lakh towards 80C and I don’t need any other tax saving instrument. However I have several others and am eagerly awaiting the new tax code.
    A govt servant cannot change the equity:debt ratio but others can.

    1. Srinivas says:

      Pattu,
      Thanks for sharing. I hope NPS will take some time to pick up.
      I hope next year, news papers experts will start writing more about NPS.

      We will also evaluate NPS in depth in coming days.

  15. pattu says:

    Thanks Srinivas,

    This is good news. I need to only invest Rs. 20,000. So we need to wait and see which is an acceptable long term infrastructure bond. I will save Rs. 51500 in the new slab and using these bond I can go one slab lower. This leaves me a minimum of Rs. 5000 per month to invest elsewhere. A much need relief for me.

    1. Pattu

      Great to see that you will be benefitted .. but it can be little sad to know that there will be indirect more expenses like increase in medical insurance premium (as cash less has come into the purview of service tax, so insurers may pass on the costs to customer) , increase in rents or home prices (read it somewhere) .. please check

      Manish

    2. rishabh parakh says:

      Hi All,

      There are two issues to consider before buying these bonds, the fine print says the bonds will be notified by the Central government. Expect this to come in a month or two until then, it is unclear whether private companies would be allowed to issue such bonds.
      The Budget has only said the new incarnation would be โ€œlong-term” the bonds could be for a minimum of five years or maybe as high as 10 years.

      Also, unlike in the earlier version, where interest earned from these bonds was also tax-deductible to a certain extent, the new avatar will not offer any such benefit as Section 80L has long been abolished. It would be interesting to see the interest rates of these new infrastructure bonds and how competitive they would be.

      1. Srinivas says:

        Hi rishabh
        Yes. It’s a good news. govt will contribute Rs.1000 for 3 years.
        Considering the fact DTC has NPS in 80C, it would be better to open NPS in next financial year (2010-11) and get Rs.3000
        DTC has only PPF, NPS, Insurance,EPF,Super superannuation. Though NPS does not have agents, from next year people will deviate and open NPS because it is part of tax saving.
        I hope next year govt will gear up advertising to popularize NPS.

        If else, I see LIC coming up with many policies and mis-directing people to buy endowment and non-term plans.

  16. Srinivas says:

    @pattu and All

    The information you got from internet was very old which was applicable when we used to get 20% rebate on tax investments. this is almost 5 year old news
    Your understanding is incorrect.
    As per the budget 2010-11, You can claim tax benefit to the maximum of Rs,20,000 towards contribution to infrastructure bonds.
    Govt only said investment in long term infrastructure bonds as may be notified by Central govt. Govt is yet to define Is same old infrastructure bonds to continue or define one more long term bonds.
    A new section 80CCF will be inserted now. Wait till April end to get clarity on infrastructure bonds.

  17. pattu says:

    Manish,

    Infrastructure bonds comes under sec 88. from what info I could get on the net, 20% of sum invested in these upto a max of 20,000 is deductible. So you would have to invets Rs. 1 lakh to get Rs. 20, 000 deduction. Also can you get these bonds only from ICICI and IDBI only?

    1. Srinivas says:

      @pattu and All

      The information you got from internet was very old which was applicable when we used to get 20% rebate on tax investments. this is almost 5 year old news
      Your understanding is incorrect.
      As per the budget 2010-11, You can claim tax benefit to the maximum of Rs,20,000 towards contribution to infrastructure bonds.
      Govt only said investment in long term infrastructure bonds as may be notified by Central govt. Govt is yet to define Is same old infrastructure bonds to continue or define one more long term bonds.
      A new section 80CCF will be inserted now. Wait till April end to get clarity on infrastructure bonds.

      1. Thanks Srinivas

        Nice addition to information on this topic . .great

        Manish

  18. vishal says:

    Manish,
    Also, I would like to know whether it is compulsory to invest 20,000 Rs. in infrastucture bond to avail savings benefit or we can invest in PPF,NSC, KVP, Insurance total 1,20,000.

    Regrads,
    VSA

    1. Vishal

      20,000 is extra benefit than 80C , you will get tax exemptions other than 80C (1,00,00) only when you invest 20k in Infra bonds .

      Manish

  19. vishal says:

    Manish,

    Is there any changes made in Medical reimbursement scheme (which was earlier maximum Rs. 15000 per year), Leave Travel Allowance (which was earlier maximum Rs. 25000 per year) and Travelling allowance (which was earlier maximum Rs. 9600 per year)

    Regards,
    VSA

    1. Vishal

      As per my information there are no changes .

      Manish

    2. No there is not ..

      Manish

  20. SAILESH says:

    @ manish
    please add information about service tax and vat and more about tax deducted at source,advance tax and their related rules and provisions… Tanx in advance..

    Best Regards,
    SAILESH S

    1. Sailesh

      We can discuss it over comments ๐Ÿ™‚ , Once some more people ask for it , we can add it or in future I can do another post , what do you say ?

      Manish

  21. Dr. Kishan says:

    Manish
    the fiscal deficit last year was about 4 lac crores and this year is about 3.84 lac crores. doesn’t this mean that the govt is getting more net money than last year. which ultimately means that the people are being taxed more in some way or the other. the net savings for people will be meagre only since although the tax slabs seem to relax the pocket the inflation and excess expenditure due to fuel price increase etc will cause a tight situation for the general public which will lead to only very small net savings even for higher middle class.
    remember the govt will never make a budget leading to loss. if it relaxes some things it shall tighten some things. it will always try to decrease the fiscal deficit. the issue now is how much return do we get now from the tax we have paid which in turn depends on the corruption status of the country. once corruption is curtailed the end consumer will start getting much more returns and profits. this decrease in corruption is the goal we should try to achieve.

    sorry for the long post

    dr kishan

    1. Dr. Kishan

      Corruption is a big issue , we pay thousands in income tax , but we dont get back even 10% of what we have paid i think . Fiscal deficit is just the difference between spending and earning , so 3.84 lacs crore of fiscal deficit means that they are short by 3.84 l c this year which they will meet by borrowing from public in some way either through bonds or any other way . its not right to say that they are getting more net money this year than last year . My understanding in these matters is not so good , so dont take my words on rock ๐Ÿ™‚

      Anybody else wants to add up ?

      Manish

      Manish

      1. rishabh parakh says:

        as rightly said by the former President A P J Abdul Kalam a strong youth movement in the country only can remove corruption and each student should take a vow to begin this exercise courageously within the family.
        It is only youth movement in the country which can remove and finally eradicate corruption and enjoy a corruption-free India by 2020 when it will be transformed into a developed country, he said replying a question from a student how to make India free from corruption.

        please also click the link to read this interesting way to curb corruption:-
        http://www.economist.com/world/asia/displaystory.cfm?story_id=15393714

        A zero contribution-An unconventional way to combat petty corruption

        rishabh parakh

        1. Rishabh

          nice link .. I can see the same kind of problem in Personal finance, Whole lot of issues are there from financial products sellers . Banks , Mutual funds , insurance , Real estate .. All of them are not taking care of investors and hence now all the investors only have to fight back (see my next article) ..

          Manish

  22. Ajay says:

    Manish,
    A good summary of the recent changes.
    I preseume the DTC which is expected next yr should lower the tax rates further .. isn’t it ?
    Once again Nice article.

    Thanks

    1. Ajay

      Its not necessary that it will lower the tax , depends on the individual composition . A person who is taking all the deductions like home loan interest , 80C , 80D , HRA etc and falls in 5-6 lac bracket might have to pay more tax . however as per the 2010-2011 tax slab rates , there will be big change in his tax liability .

      Manish

  23. Suhasini says:

    Manish its always the common man who suffers because of income tax, Government always favour HNI to stay out of this slab.

    1. Suhasini

      That is because of the inbuilt structure of the tax system , read my comment above to Rishabh to understand why .

      Please let me know your comment on that too .

      Manish

  24. bhupendra bhandari says:

    right, the comman man has not got much benefit, it is only the upper middel class has benefited more in % terms.
    it should be understood that the benefit can be given to only those who contribue in the first place. a common man any ways pays a very little tax so the scope for the benefit is also small. similarily an agricultarlist pay nil tax irrespective of his income so his benefit is also nil, that does not mean that injustice has been done to him visa vis other class of persons.
    Tax on income of Rs.3 lac is 14K i.e. 4.66% where as tax on income of Rs. 10 lac was Rs.210,120/- i.e. 21.1%. so it is appropriate that the person in higher tax bracket get higher benefit because is already in a dis-advantag with a so called comman man.

    1. bhupendra

      in a way you are correct , but we have to see incremental benefit . lets see who got benefitted with this budget compared to last year .

      manish

      1. rishabh parakh says:

        hi,

        i think its incorrect to say that the benefit can/should be given to only those who contribute in the first place but very true to say that a common man any ways pays a very little tax so the scope for the benefit is also small,

        means there should be a scope & right for Aam Aadmi to save; may be small and that’s the comparison i was trying to make that the common man has got NOTHING in this budget not a single % tax savings.

        in a way its inappropriate to say that injustice is not done to Aam Aadmi.

        and if you look at the flip side one always have to pay price for being Rich, that is the biggest irony, people who have the capability to generate more are being taxed more and always taken as for granted to contribute more rather than being given advantage for their contributions.

        what do you say guys…

        1. Rishabh

          If you were Finance Minister , who would you structure the slabs so that aam admi gets benefitted ? I think that for every subsequent slabs only higher income will be benefitted , as upto 5 lacs the tax will always be 10% only, even if its raised to 10 lacs , it has no effect for people earning 5 lacs , the salary is same for them and the slab is same .

          What do you think ? Can we have some different kind of tax treatment rules totally different of what is there today ?

          Manish

          1. rishabh parakh says:

            Hi Manish,

            I donโ€™t what I have would done if I were the FM but as a Common Man I would like to propose the following changes,

            1. As far as changes in tax rates is considered I think there should be No tax up to Rs 3 Lakhs keeping in mind the current cost of living and inflation.

            2. At the same time, tax base needs to be increased by taking Stringent measures against Tax Evaders, I am sure this will help budget a long way in increasing Govt. revenues.

            3. More benefits should be provided to Senior Citizens by making the cut off age for qualifying from 65 to 60 keeping in mind the other sector and also extending their exemption limit to 5 Lakhs as they are mostly dependant on pensions or life time savings only.

            4. FD interest should be made non-taxable, so that conservative investors can earn higher post tax returns.

            5. Reintroduced the Standard Deduction for salaried class tax payers so as to give them fair chance for accounting for their expenses.

            6. And the most IMPORTANT of ALLโ€ฆ

            Make the Buisness / Professional Class assessee pay their taxes duly.

            Do you know as compared to salaried class tax payers business class people are almost paying negligible taxes by claiming expenses which are generally not incurred at all?

            And the taxes which is deducted at source is also being claimed by way of Refund, Donโ€™t know why the Govt. over the years has not taken up any steps to check that.

            What do you say Manish and what would you have done if you were in FM shoes.

            May I request all the Readers to please share their views on this.

            Regards
            rishabh parakh

            1. rishabh parakh says:

              Hi Manish,

              I donโ€™t know what I would have done if I were the FM but as a Common Man I would like to propose the following changes,

              1. As far as changes in tax rates is considered I think there should be No tax up to Rs 3 Lakhs keeping in mind the current cost of living and inflation.

              2. At the same time, tax base needs to be increased by taking Stringent measures against Tax Evaders, I am sure this will help budget a long way in increasing Govt. revenues.

              3. More benefits should be provided to Senior Citizens by making the cut off age for qualifying from 65 to 60 keeping in mind the other sector and also extending their exemption limit to 5 Lakhs as they are mostly dependant on pensions or life time savings only.

              4. FD interest should be made non-taxable, so that conservative investors can earn higher post tax returns.

              5. Reintroduced the Standard Deduction for salaried class tax payers so as to give them fair chance for accounting for their expenses.

              6. And the most IMPORTANT of ALLโ€ฆ

              Make the Buisness / Professional Class assessee pay their taxes duly.

              Do you know as compared to salaried class tax payers business class people are almost paying negligible taxes by claiming expenses which are generally not incurred at all?

              And the taxes which is deducted at source is also being claimed by way of Refund, Donโ€™t know why the Govt. over the years has not taken up any steps to check that.

              What do you say Manish and what would you have done if you were in FM shoes.

              May I request all the Readers to please share their views on this.

              Regards
              rishabh parakh

            2. Sathya says:

              As put by Robert Kiyosaki, its all “Conspiracy Of The Rich”…for the 6th point which u have mentioned…

            3. Seems you are correct .. But what is the solution?

              manish

            4. Rishabh

              Nice points from your side .

              1) Suggestion of increasing limit upto 3 lacs looks reasonable because anyways people who fall in that bracket pay less tax (14,000) and removing that part will make sure that a big chunk of people get out of “tax-payer” area , that would help in paper work also as it would wipe out almost 50-60% people , correct me if i am wrong ๐Ÿ™‚

              2) I didnt understood this point , what is “tax base” ?

              3) This is the most valid point I guess , Considering we dont have a central or state level pension or health benefits automatically for SS , they shouls serisouly think about this . What about No tax payment for them upto 2 or 3 times the normal exemption . does this look ok ?

              4) No comment on this , if this has to happen then what about NSC , KVP and other debt products ? I am not able to see the larger picture may be !! .. you tell me .

              5) I am not aware of the Standard deductions which were available earliar , can you elaborate ? What are the additions you want to make ?

              6) This point is really worrisome .. I think we are getting much lesser than what govt can get . is it 10% ? Man .. in that case govt can do a lot , feels like this point alone can change fortunes of country !!

              Apart from this , I think the tax filing and paying should be made more simple , I dont know even a single person who says he/she paid taxes and files returns without any fail .. Am I being realistic here ?

              Please others also share your views ..

              Manish

            5. rishabh parakh says:

              1) Yes, enhancing the exemption limit to 3 lacs may remove a big chunk of Mango People (Aam Aadmi) get out of โ€œtax-payerโ€ area
              2) โ€œTax baseโ€ means expanding the coverage of colleting tax revenue and catching tax evaders is one of the measure.
              3) Senior citizens rely heavily on post retirement and pensions (that too only for govt. employees) and their Medical cost are at the Peak also we donโ€™t have any social security system in place like US so extending their exemption limit to 5 -8 lakh would greatly help them.
              PS: Do you know the biggest expenditure an Indian incurs during his life time is on two things:-(1) Marriage (2) Medical
              4) Removing the tax on interest on FDs & NSC (though last year only) would makes them an attractive investment avenue again as currently the post tax returns on Fds is around 5.60% (8% less 30% tax approx) less than inflation.
              (5 & 6) earlier, standard Deduction used to be allowed to all the salaried people which were withdrawn few years back for the reasons best known to the Govt. of India, “This is a form of relief measure for salaried class. Standard deduction was given to employees to compensate for the expenses incurred by them for earning their salaries. The abolition of standard deduction by the Finance Act 2005 brought in a lot of inequity in the matter of taxing the salaried class, who had got used to the deduction for nearly 30 years.
              The salaried class has no resorting to tax planning for claiming expenditure. Conveyance allowance of Rs 800 a month is a pittance. Inflation has pushed up nominal earnings, and real incomes are low. The business class is at an advantage, as it can claim all sorts of deductions relevant to the earning of business income.
              At the time of its abolition, standard deduction stood at 40 per cent of salary or Rs 30,000, whichever was less, for those whose income was less than Rs 5,00,000. Above this limit, it was allowed at Rs 20,000. Acceptance of the Kelkar Committeeโ€™s recommendation caused a lot of heartburn among the salaried class. The time for redressal has arrived.
              tax filing and payment of taxes is not that complicated but the major reason is the lack of seriousness by the people to file and manage their finances, they do bother to file their IT returns on time till the time the need arises due to :- Visa requirement, Home loan, personal loan or the IT notice delivered to them.

              whats your take on this Manish

              regards
              rishabh parakh

            6. Rishabh

              PS: Do you know the biggest expenditure an Indian incurs during his life time is on two things:-(1) Marriage (2) Medical

              I agree with it , i was going to write a short article too on “Why I am angry at Indian Marriages” , showing my concern on how people waste too much money on marriages to show off .. they have changed it from a ritual to a show off event and hence flushing all hard earned money in days .

              I agree with other views of yours .

              Manish

            7. NKanani says:

              Rishabh,

              The tax “evasion” by business class is an area where govt. should do a lot. This is largely ignored – you find lakhs of business people in India not paying any taxes at all! It is very unfair to have TDS to the last rupee from salaried class (giving him “tax relief” each year huh) and not a paisa from business class!

            8. Rishabh

              As pointed by NKanani , what are the reasons or blocking points for govt for not taxing people from smaller cities , there are many small business man or shopkeepers who have small shops but make big money .

              manish

            9. rishabh parakh says:

              hi NKanani,

              not taxing the business class as compared to the salaried class is the most imp. issue which i have menitoned in most of comments earlier.
              businessmen are always at a great advantage as mostly as pointed by you and Manish they get away easily without paying any taxes and those ๐Ÿ™‚ who are earning the big mullah can claim all sorts of deductions relevant (or irrelevant) to the earning of business income.

            10. rishabh parakh says:

              Manish,

              even the businessmen in metro and other big cities are following the same trend and its difficult to analysis the reasons for this.

              what do you say?

  25. puneet says:

    Hi Maneesh,
    One question, not sure if you have any info on US tax filing procedures. But I am trying to file my US tax returns and there have been 2 options provided to me by my tax planner. The one is the simple tax planning with standard deduction and other one is with something called as SDIRA or self directed individual retirement plan. With SDIRA the tax guy is claiming to get me additional $1k. But I am not sure if I should go with that option, I am afraid if it is legal thing to do and if their is a risk of audit in it? Also do I really need to have SDIRA? Thanks for your help.

    1. Puneet

      you have to first understand what is IRA ? IRA is US equivalent of Providend fund kind of thing. its a retirement account . There are different types of IRA from tradiotional to Self Directed ones

      Self Directed IRA (SDIRA) is similar to ULIP’s in India as fas as I understood from what i read in last 10 min .

      I would say that you should not forget basic principles of financial planning .

      1. Buy what you understand .
      2. Ask your Financial planner/tax planner more questions , ask him to explain you how its saving $1k for you ?
      3. Read more and more from internet . ask twitter.com/ramit about this , may be he answers fast .

      See


      http://en.wikipedia.org/wiki/Individual_Retirement_Account

      there is no alternative to learning things .. try to learn stuff . its not tough , beleive me

      Manish

    2. Asif says:

      puneet,

      you can file your US tax return thru either of the 2 websites.
      Enter your W-2 informations and you can see in these sites how much you can get back in federal and state tax return.

      http://www.taxact.com
      http://www.turbotax.com

      very little fee and you can get maximum return!
      I have no idea about the SDIRA & $1K deal but I would suggest do not be greedy and fall in the risk of audit.

      just FYI.. I used turbo this year & tax act last year.

      1. Asif

        Thanks for the update , Are tax laws in US more complicated than India , can you give some brief about it in say 1 paragraph ?

        Manish

  26. mynameisnotkhan says:

    1) people earning between 1.6 and 3 are screwed.
    2) reducing tax means more inflation
    3) raising petrol prices means more costly transport, more costly food items
    4) kommunal kangress sucks
    5) welcome inflation

    1. mynameisnotkhan

      Yes , You are correct that people earning less than 3 lacs do not get much here . can you explain why you say “reducing tax means more inflation? ” , how ?

      manish

      1. mynameisnotkhan says:

        reducing tax means more money to spend. more consumption means more demand, then it will lead to price rise once again. couples with rise in petrol, diesel, inflation (wpi) will cross 10% and cpi will cross 20%. Let the direct tax code get implemented and see downfall of Indian economy

        1. rishabh parakh says:

          hi MNINK (my name is not khan),

          this is true but subject to the following conditions:-

          1. Reducing income tax will increase disposable income of consumers. Therefore consumer spending will increase. This could cause inflation, if the economy is already quite close to full capacity.

          BUT
          * If economic growth is already low, a cut in income tax is unlikely to cause inflation.

          * It also depends on consumer confidence. For example, if consumer confidence is very low, a cut in income tax may not lead to extra spending. People may prefer to save the increase in disposable income. Therefore, inflation will not increase in this case.

          1. rishabh parakh says:

            manish,

            what do you think about the above analysis about inflation and tax cut???

            reagrds
            rishabh parakh

            1. see tne comment below , i already commented

              manish

        2. i agree with rishabh

          less tax can also lead to more saving … which can lead to more investments in equity market and can lead to more prosperity .

          what do you think ?

          Manish

          1. Srinivas says:

            Hi All,
            More money left with people means more purchasing power. Few people add this money to liquid assets like equity, bank deposits and illiquid assets like real estate. Wealth also has a feedback on economic activity.

            In a modern economy, the increased desire to purchase goods and services results in a corresponding increase in demand and โ€œpriceโ€ is the ultimate equalizer between demand and supply.
            If you are left with 50k more, you buy things or invests, that would create demand but inflation increases only if supply is not met.
            If demand is more and supply is less means inflation.

            India need to address the supply side. DTC in its present form has many shortfalls, but it cannot lead to downfall of indian economy in anyway.

            1. rishabh parakh says:

              How much the economy is able to produce will reflect the rise of the working population. Increases in output will also depend on factors that enable more output to be produced from available resources – in other words, productivity increases.

              There will be some price level at which there is a broad balance between the demand for, and supply of, goods and services. At this point there tends to be no upward or downward pressure on inflation.
              but if there is an increase in demand for some reason, for example due to the said reduction in income tax, or because consumers suddenly feel more optimistic and start spending more money rather than saving?

              when demand rises above what firms can produce at their normal level of operation there tends to be upward pressure on costs and prices.

              To contain inflationary pressures in the economy, demand needs to grow roughly in line with output. Output grows over time at a rate which largely depends on factors which increase productivity. If demand grows faster than this, unless there is spare capacity in the economy – such as after a recession – inflation is likely to rise.

            2. Yes

              I think there is a larger section of people who rather spend the extra savings they get from tax rules, as they consider it as “bonus” which is above the mandatory tax saving .

              How come DTC lead to down fall ? What shortcomings do you see in DTC ?

              Manish

            3. Pravin says:

              this is a misunderstanding of taxation. just because the govt keeps a percentage of your income doesnt mean that it wasnt earned. by reducing tax rates, the govt is not doing you any favor.nor is it boosting any demand artificially. it is only ‘theiving’ less.if the money remains as tax, it is wasted for salaries paid to babus or wasted in corrupt welfare programs for favored vote banks.
              if the money is returned(via low tax rates) to the rightful income earner,then it is either spent or invested in the free and proper manner it should be.

              just because it is legal, taxation doesnt stop being theft.there were riots in india when the british introduced the tax in 1861. the rate was 1%!.then they bumped it upto 3% and civil unrest followed. from 1% to indira gandhi’s 98% and now back to 30%, the silent indian income earner has come to believe that taxation is a natural phenomenon. no ,it is not. it is a mechanism for opression and lack of accountability.
              really,can we not grow out of our slave mentality?

    2. Pravin says:

      reducing tax means more inflation?. huh. explain. does reducing theft increase the cost of goods ?

  27. rishabh parakh says:

    hi Sathya,

    additional investment of Rs. 20000/- in the infrastructure bonds is eligible u/s 80C only thereby increasing the limit to overall 1,20,000/-.

    market has reacted positively to the budget as it has more goodies for the corporates which has shown in the increase in today’s share market too…

    regards
    rishabh parakh

  28. Amit says:

    Tax slab increase and paying lower taxes is always good news for common man :).
    I just posted Income Tax calcualtor keeping in view the new tax slabs & the infrastructure bond on my blog. So you can check how much would you gain in Income tax for Fy 2010-11.

    1. rishabh parakh says:

      True Amit,

      Aam Aadmi expects every year even though the expectations are not always realized, but we as a common man always expect as at the end of the day everything that is happening in this world is done on hopes & expectations only. its a dream of all the common man to get tax relief and more savings but who are these “Aam Aaadmi”
      as toady’s budget provides absolutely no tax savings for the person earning up to Rs. 3 lakh p.a. and those who are earning up to Rs. 4 lakh would end up saving only Rs. 10,000.

      and the honourable minister is saying that revised tax rates would provide benefits to 60% taxpayers its interesting to see in the light of the comparison above whether the said claim is justified.

      what do you think Amit…can you please share your blog add.

      regards
      rishabh parakh

      1. Amit says:

        I blog at http://www.finwinonline.com
        You can also visit the same by clicking on the name diplayed in comment.

      2. Rishabh

        I think finance minister considers even rs 100 profit as benefit ๐Ÿ™‚ . in that case 100% indians will be benefitted ๐Ÿ™‚

        Manish

        1. rishabh parakh says:

          very true manish,

          thats the irony and the way politicians play with words.

          But in reality original benefit is mostly restricted to very few…

          what do you say???

          regards
          rishabh parakh

          1. agreed

            but in some way even if a person is benefitted by Rs 10k , it can be a big thing for him .. we never know , so in one way they are getting benefitted ?

            manish

            1. NKanani says:

              Manish,

              This is a great article – Thanks!

              I am not authorized to comment on this, however what i feel is this –
              As experience increases, the salary of individuals increase. Looking at the savings you have calculated in the table, these are not small savings – 50K if your income is 8lakh or more! So, if you look from government’s point of view, there is a definite decrease in amount of tax that will be collected.

            2. NKanani

              Tax collection from each person might decrease , but there are indirect ways tax might increase .. like

              More people interested in paying tax , because now they have to pay less , so people who were first not paying might now pay .

              What are your views ?

              Manish

            3. Nkanani says:

              Thanks Manish,

              I don’t think that this would increase number of people paying taxes. There is no reason for someone already not paying taxes to start paying any tax. Even if people start paying the taxes, they would ensure that the amount paid for tax is not significant.

  29. Sathya says:

    It is best expressed in your words – New tax slabs would benefit greatly to the higher middle class as compared to the Aam Aadmi. Good that the slabs have been increased.

    Saral-2 wud provide some relief. Nothing is said about the tax deductions of 80C. Is that still 1 lac?? and 80 D 15k??

    Need to gather more info abt infrastructure bonds…

    In all, doesnt seem to be an monumental change.

    Q) How will the market react to this budget??

    1. Sathya

      The limits for 80c and 80D are same . just that you can now put 20k extra in Infra Bonds .

      Infrastructure bonds are available through issues of ICICI Bank and IDBI, brought out in the name of ICICI Safety Bonds and IDBI Flexibonds. These provide tax-saving benefits under Section 88 of the Income Tax Act, 1961, up to an investment of Rs.1,00,000, subject to the bonds being held for a minimum period of three years from the date of allotment.

      markets have already reacted positively to this and in coming days we can see some good cheer up upmove .

      Manish

      1. rishabh parakh says:

        manish,

        infra bonds are added to section 80C and now the total limit u/s 80C is rs. 120000/- and section 88 is already done away with few years back and replaced by 80C.

        the new additional infra investments are long term in nature and useful to traditional investor.

        1. Thanks for info .. i was under the impression that Sec 80C is same 1 lac and additional 20k is under some other section .

          manish

  30. Ravi Chandra. M says:

    Hi Manish,

    Can you show us some light on “infrastructure bonds” and related content.

    Thanks.

    1. Ravi

      Infrastructure bonds are available through issues of ICICI Bank and IDBI, brought out in the name of ICICI Safety Bonds and IDBI Flexibonds. These provide tax-saving benefits under Section 88 of the Income Tax Act, 1961, up to an investment of Rs.1,00,000, subject to the bonds being held for a minimum period of three years from the date of allotment.

      Do you think these can be useful for investors ? Does it suit you ?

      Manish

      1. Srinivas says:

        One for benefit from the budget is
        if you open NPS account this year, govt will contribute Rs.1000 per account for next 3 years.
        Considering NPS is under 80C from DTC effective April 1, 2011. It is better to open an NPS and contribute as per needs.

        1. Ajay says:

          Hi Srinivas,

          I recently went to the Axis bank branch to check the details for NPS as they are authorised centers , but they say that there is no notification to them. No one in the bank knows it. Please could you help let me know the procedure to open a NPS a/c.

          Thanks.

          1. Ajay

            Wait for some days ๐Ÿ™‚ , the tax laws has come just 1 day back so it might take time to get things in place . you know govt things ๐Ÿ™‚

            Manish

            1. Srinivas says:

              Wait till April end. Even if you open tomorrow also you won’t get benefit.
              This budget is effective from April 1, 2010

        2. Amit says:

          Yes Srinivas
          Its true that govt. would be contributing Rs 1000 per account per annum under the Swavalamban scheme but that comes with some covets.
          1. Your contribution should be minimum Rs1000 to a maximum of Rs. 12000 per year.
          2. Its for unorganised sector contributors only (Anyone not working for the central government, central government autonomous bodies or the state government has been categorised as the unorganised sector.)

          1. Amit

            Thanks for the info ๐Ÿ™‚ . i asked Srinivas for this .

            So people working for private companies will be able to get the benefit .

            Manish

        3. Srinivas

          Really , i didnt knew this ๐Ÿ™‚

          How much is the minimum contribution to NPS ? What are the restrictions to get this benefit of 1,000 you mentioned ? I am sure its mostly available if you keep investing for long term and with minimum amount . Can you find out more ?

          Manish

          1. Srinivas says:

            As per the yesterday budget document, Any citizen in unorganized sector can open NPS account for the financial year (2010-11) with minimum payment 1000 and maximum 12,000. Govt will pay Rs,1000 for next 3 years.

            But DTC has NPS in 80C, it would have forced people to go for NPS from next year, but still FM has introduced this offer to encourage people to come and enroll it.
            I feel it’s a good move. I suggest people to wait till April end and once govt circular reaches bank/post office, go and open NPS account.

          2. rishabh parakh says:

            Hi Srinivas /Amit / Manish
            The NPS is the best way for small savers to build up some financial security for retirement. However, the scheme has proven difficult to market. In the absence of commission-earning agents, thereโ€™s no one to sell the NPS. For a young person, this Rs 3,000 welcoming gift from the NPS would grow manifold till the time retirement comes.

            According to the finance ministerโ€™s Budget speech, this scheme is expected to pull in 10 lakh members into the NPS. Thatโ€™s an expense of Rs 100 crore a year.

            what do you think about this: “It really may not be possible to get people into a financial scheme without either intense marketing or a mandatory framework. ” please share your views

            regards
            rishabh parakh

            1. Rishabh

              Should we wait till we get the clarity on maturity taxation on NPS , or will it be fine to invest in it right away ?

              manish

            2. Srinivas says:

              I feel we can open NPS account; may not be just right way but after October 2010. Probably we can hear more about NPS from the govt and industry as we near DTC.

              We may not need to wait for taxation news, as govt can revise it any time. Even after few years, govt may plan to remove taxation during maturity.

            3. Makes sense ๐Ÿ™‚

              Manish

          3. saurabh sharma says:

            Dear Manish,

            Can you please let me know, which are the best options for SIP or Mutual Fund.
            I can spend Rs.2000/PM in both cases. What will be the aprox return%.
            Also suggest, If I invest Rs.200,000 to construct a godown, I can get Rs.4000 P.M, which option should I go for?

            Regards
            Saurabh Sharma

            1. Saurabh

              Looks like the 4000 PM from 20000 investment is the best option if its really true .. thats around 2% return per month and more than 26.8% return per year .. I think you should keep the mutual funds option a secondary one ๐Ÿ™‚

              Look at : https://www.jagoinvestor.com/2009/08/list-of-best-equity-diversified-mutual.html

              Manish

            2. saurabh sharma says:

              Thanks Manish!:)

  31. Manish Misra says:

    Nice article Manish!

    In case readers of your blog wish to check how Union Budget 2010-11 has actually affected their personal income tax liabilities, they can use the simple excel based Tax Impact Calculator posted on my blog. Income Tax Impact Calculator โ€“ Budget 2010-11

    1. Manish

      thanks for the link . I am sure the calculator would be good for them . What are your views on This Tax slab , do you think this is mini-DTC ๐Ÿ™‚ . What are your views on “Can we do without Direct tax code is as anyways we have higher tax limits now ” ? \
      Wondering if DTC comes , it would be better then now or not ?

      Manish

      1. Amit says:

        I too think with these increased tax slabs we are moving towards DTC and now I see possibility of it getting implemented next year. But as for me I would be paying more tax if DTC gets implemented in its current form i.e. with EET concept on investments. Its kind of punishing people who invest long term and who currently use all the tax exemptions to full.

        1. Amit

          Hmm.. in a way yes you are right , but we also have to think this way that by change in rules , sometimes we get benefitted also and at that time we are happy , so some times it can go against us too .. there is always a section which will be hampered . its like accident, where it happened to you but you are not responsible ๐Ÿ™‚

          What do you say ?

          Manish

    2. rishbah parakh says:

      thanks Manish,

      this calculator helps and simplify the way to know the actual effect on individual tax payers

        1. Srinivas says:

          I use the tax calculator from Nithya.
          I found it very useful than any one in internet.

          http://ynithya.com/taxcalc/

          This tax calculator is not yet updated with 2010-11 budget statement, i hope nithya will do it soon.

          1. Srinivas

            I agree that this one is one of the best calculators but the problem is simplicity and length , 9 out of 10 would not prefer to use it because there is “too much to do” ๐Ÿ™‚

            What do you say ?

            Manish

            1. Srinivas says:

              Hmm….Then I am the 1 in 10 using it. ๐Ÿ™‚
              Most of the online calculators gives approximately tax figure (+/- few thousands) because they don’t consider the city you live in, and many things.
              In this calculator, most of the stuff are filled with default values, one should just fill in figures from their monthly pay slip.
              But I find it easy.

Comments are closed.

Subscribe to Emails

More than 1,50,000 investors across the world trust & read Jagoinvetor articles. Subscribe for emails updates and get instant access to a free ebook.

Jagoinvestor is one of the most trusted personal finance websites which writes on various topics like financial planning, mutual funds, insurance and banking.

 

Download Our FREE Ebook!

Available only for first 100 people today

Download Our FREE Ebook!

Available only for first 100 people today