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Ernst & Young on how the Budget 2010 will affect individuals and businesses.

F inance Minister Pranab Mukherjee took the first step towards implementation of the Direct Taxes Code (DTC) on Friday. While retaining the

basic exemption limits for all income levels (as in the DTC), he increased the other slabs.

For instance, while the basic exemption limit for individuals has been retained at Rs 1.6 lakh, the 10 per cent rate will now be applicable for the Rs

1.6 lakh-Rs 5 lakh bracket. Earlier, the 10 per cent rate was applicable for income of Rs 1.6-Rs 3 lakh. The hike in the slab means that the

taxpayer is going to save Rs 20,600 for incomes up to Rs 5 lakh.

Further, he has also increased the limit for the next income slab -- that is, the 20 per cent tax rate will be applicable for incomes of Rs 5 lakh-Rs 8

lakh instead of Rs 3 lakh-Rs 5 lakh. And the highest rate of 30 per cent will be applicable on incomes of over Rs 8 lakh (earlier Rs 5 lakh).
The maximum benefit that will come because of the increase in slabs would be Rs 51,500. "With the consumer inflation index rising at 14.97 per

cent (December-end), this move will help reduce some of the burden by leaving more cash at the individual's hands," said a financial planner.

 Calculate your new tax

In addition, the finance minister has also increased the limit of investments under Section 80C by Rs 20,000 -- from Rs 1 lakh to Rs 1.2 lakh.

MORE DOUGH TO BLOW Figures in Rs

Particulars Men Women Senior Citizens

Threshold 160,000 190,000 240,000


exemption

Tax slabs 10% 160,001 to 190,001 to 240,001 to


500,000 500,000 500,000

20% 500,001 to 500,001 to 500,001 to


800,000 800,000 800,000

30% Above Above 800,000 Above 800,000


800,000

[Clause 2, Clause 30 and First Schedule]

However, the benefits will only be given to people who invest in infrastructure bonds. A separate Section 80CCF has been introduced under

which this benefit will come to the investor.

For the taxpayer in the higher income tax bracket, if one adds the tax benefit of Rs 51,500 with the 80CCF benefit (Rs 6,180), the total reduction

in the tax burden would be Rs 57,680.

On a total income of Rs 10 lakh there will be effective tax saving of Rs 57,680 to an individual.
LESS TDS Figures in Rs

Section Particulars of payment Existing threshold Proposed threshold


reference

194B Winnings for lottery or 5,000 10,000


crossword puzzle

194BB Winnings from horse race 2,500 5,000

194C Payment to contractor 20,000 (single) 30,000 (single)

194D Insurance commission 50,000 (aggregate) 75,000 (aggregate)

194H Commission or brokerage 5,000 20,000

194I Rent 2,500 5,000

194J Fees for professional or 120,000 180,000


technical services

Source:
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