Budget 2012, is quite disappointing as the overall impact of this budget is not favorable to the pockets of tax payers. Changes announced in the budget speech regarding, “tax saving limit under section 80C”, “increase in tax slab” and “deduction under section 80CCF for tax saving infrastructure bonds” was not as expected.
- Change In Tax Saving Limit :- Deduction of Rs 1 lakh under section 80C has not been increased.
- Change In Income Tax Slab :- Income tax slab for the financial year 2012-13 has been increased by Rs 20,000 for Male tax payers.
Another deduction which was part of earlier budget i.e deduction under section 80CCF for tax saving infrastructure bonds has been removed this year. This will reduce the total tax saving of individual tax payers from Rs 1.2 lakhs (in FY 201-12) to Rs 1 lakh (in FY 2012-13). As there was no announcement on this part of deduction by the finance minister in his budget speech, it was expected that the deduction under section 80CCF may continue this year. But now confirmed by the sources of finance ministry about the of this deduction.
Discontinuation of this deduction will majorly impact the pocket of tax payers in the income segment of Rs 8 lakh as for lower income group the limit of Rs 1 lakh is enough. But the upper segment, i.e tax payer with annual income upto Rs 8 lakhs will directly get impacted with this change. As this make them pay approx. Rs 2000 more tax for next financial year whereas senior and very senior citizens will end up paying approx. Rs 4000 more tax due to this.
In Budget 2012, it is been proposed to increase the fund to be raised by infrastructure lenders in 2012-13 by doubling the limit to Rs 60,000 crore. The limit raised is for tax free infrastructure bonds which offers tax free interest on investment whereas tax saving infrastructure bonds offers deduction on the amount of investment subject to a limit of Rs 20,000 (which is discontinued in FY 2012-13).
Exemption & Deduction Through Tax Free Infrastructure Bonds & Tax Saving Infrastructure Bonds Under Section 80CCF
|Investment under tax free infrastructure bonds is taxable||Investment under tax saving infrastructure bonds is taxable (deduction upto Rs 20,000 allowed for FY 2011-12)|
|Interest earned on tax free infrastructure bonds is not taxable (tax free).||Interest earned on tax saving infrastructure bonds is taxable annually.|
|Tax free bonds offers reasonable returns||Tax saving bonds offers better returns|