On the Budget day, when the Finance Minister reads through reams of paper, the common man is often left confused. Worse still, there are a whole lot of numbers and jargons like capital account expenditure and current account deficit that could baffle many.
But hidden within those papers are numbers that impact your wallet directly. For example, in the last Budget the Finance Minister (FM) abolished the Fringe Benefit Tax that the employer paid for providing benefits to employees.
These benefits included company car or house and payment of tuition fees of employees’ children by the employer. This financial year onwards, employees will have to bear the tax burden that the government levies on such perquisites.
And there are several similar measures that impact the common man directly. Here are few sections you should look for without actually going through the entire Budget document.
Rates of income tax: This section gives the basic exemption limits and rates of taxation beyond a certain limit. If the basic limit is enhanced, it would mean more money at the hands of the individual. For instance, last July FM hiked the basic limit for individuals from Rs 1.5 to Rs 1.6 lakh. For women and senior citizens, the new limit is Rs 1.9 lakh and Rs 2.4 lakh, respectively.
Section 80C: This section includes instruments where an individual can invest to save tax. In addition, there are certain expenses such as, school or college fees for children that are included under this section. The current limit is Rs 1 lakh. Besides investment in the Employee Provident Fund and principal of home loan, there are a large number of instruments like post office saving schemes and equity linked savings schemes where one can invest to claim the deductions.
Section 80D: Under this section, a person can claim deduction for paying health insurance premium. The general deduction available to each taxpayer is Rs 15,000, for self, spouse and children combined. A person can claim Rs 15,000 additional deduction in case he pays for his or her parents’ policy. If the amount is paid for a senior citizen, then one can claim an exemption of Rs 20,000.
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Section 24: This deals with the interest paid on a housing loan. Under this section of the Income Tax Act, interest paid up to Rs 1.5 lakh a year on a home loan can be set-off from salary or business income, for a self-occupied property.
Section 80E: Under this section, one gets tax benefits on repayment of loan taken for higher studies or post graduation courses like engineering, medicine, management and others. The existing benefit is Rs 25,000.
There are other lesser-known sections, where a person can claim additional deduction from his income. These include money spent for maintenance of handicapped dependants (Section 80DD); money spent for medical treatment of self and dependants (80 DDB) and amount paid for charity (Section 80G).
If you miss the Finance Minister’s speech, you can get a copy in newspapers as well as on the ministry’s website. The website elaborates all the amendments to the existing tax structure.