Giving with one hand and taking with the other, Finance Minister Arun Jaitley today hiked tax deduction limit for individuals to Rs 4.44 lakh, but slapped an extra surcharge on super-rich and raised service tax rate.
The individual taxpayers would get additional deductions of up to Rs 74,600 a year from their taxable income following new measures, in lieu of investments in pension and health insurance schemes, among others.
At the same time, the increased super-rich surcharge and a higher service tax rate will help the government mop up a net amount of Rs 15,068 crore in tax revenues in next fiscal.
The ultra-rich would, however, be spared of any wealth tax, which has been scrapped, and all with annual income of Rs one crore or more would have to pay an increased super-rich surcharge of 12 per cent, up from 10 per cent currently.
The companies have emerged as the biggest gainer of the new taxation proposals, which include a phased reduction in the corporate tax rate from 30 per cent to 25 per cent over a period of four years.
In his bid to move closer to the Goods and Services Tax (GST) regime, Jaitley raised service tax from 12.36 per cent to 14 per cent which will make smoking and consumption of other tobacco items, as also a whole lot of services including air travel, phone bills and eating out, more expensive.
On the direct taxes side, Jaitley also increased surcharge from 10 per cent to 12 per cent on corporates with income of over Rs 10 crore. Companies having earnings between Rs 1-10 crore will also have to pay a surcharge of 7 per cent.
The Budget for 2015-16, has proposed raising the tax deduction limit by Rs 10,000 to Rs 25,000 for payment towards health insurance premium. For senior citizens, this limit has been hiked to Rs 30,000.
At the same time, exemption of transport allowance has been doubled to Rs 1,600 a month, resulting into total benefit of Rs 19,200 annually.
To provide social safety net and the facility of pension to individuals, an additional deduction of Rs 50,000 was proposed to be provided for contribution to the New Pension Scheme under Section 80CCD.
"After taking into account the tax concession given to middle class tax payers in my last Budget and this Budget, today an individual tax payer will get tax benefit of Rs 4.44 lakh," Jaitley said in his Budget speech.
