Budget 2005: Good news for taxpayers
In a major relief to tax payers, the Union Budget for 2005-06 changed income tax brackets.
According to the Budget proposals, there will be no surcharge up to Rs 10 lakh (Rs 1 million) taxable income.
The threshold exemption level for women was fixed at Rs 125,000, while the exemption level for senior citizen was fixed at Rs 155,000.
While the standard deduction is proposed to be removed, other exemptions are also proposed to be cleaned up.
Chidambaram proposed to allow the tax payer greater flexibility in making savings/investment decisions.
Accordingly, every taxpayer was allowed a consolidated limit of Rs 100,000 for savings, which will be deducted from the income before tax is calculated.
This means that if you earn, for example, Rs 300,000 a year and invest Rs 100,000, then you will be required to pay tax on only Rs 200,000.
However, there was no change on deductions on housing loan interest; medical insurance premia; specified expenditure on disabled dependent; expenses for medical treatment; deduction in respect of interest on loans for higher studies; and deduction to a person with disability.
Tax collections in 2005-06
The direct tax collections up to January 31 2006 stood at Rs 1,09,831 crore (Rs 1,098.31 billion).
Three major reasons for the shortfall in direct tax collections were lower payment of advance tax by certain sectors including petroleum, banking, insurance, and telecom; heavy rains and floods in various parts
of the country including Maharashtra, Gujarat, and Tamil Nadu, and grant of exemption to small exporters with respect to profits on sale of duty entitlement passbook (DEPB) credits and deferment of taxes in cases of
non-exempt exporters over five years.
While high crude oil prices and less-than-expected demand growth for petroleum products has impacted advance tax payments of the petroleum sector, the banking sector had to make do with lower-than-anticipated profitability growth.
Till January 31, the government collected about Rs 44,491 crore (35 per cent increase over the same period last year).
In the corporation tax front, collections stood at Rs 65,094 crore (21 per cent increase); the Budget estimate is Rs 1,10,573 crore (Rs 1,105.73 billion) for the current fiscal.
Indirect tax collections grew by 16.2 per cent till January to touch Rs 1,53,988 crore (Rs 1,32,501 crore).
For 2005-06, the gross indirect tax collections had been Budgeted at Rs 1,92,215 crore (revised estimate of Rs 1,71,390 crore for 2004-05).
Image: A sign of good times.
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