Analysis of the Budget 2010 that provides you with an insight as to how the provisions of the budget, impacts your tax & financial position.

1. Are you truly rich with the budget 2010 proposals?
Budget 2010 in the Indian parliament was a “masala” movie with our
politicians thumping the desk whenever a populist fund allocation was
announced and the opposition walking out when the price of
petrol/diesel was increased by a rupee for each litre.
This budget analysis is brief and aims at providing you with a lowdown
on how this budget impacts your wallet.
Happy moments first
Change of Income Slabs for Taxation
Though the threshold limits for NIL tax has not been touched upon,
the slabs though has been re-jigged to provide some tax relief for
higher salary individuals. The revised slabs are as follows:
Total Income Tax Rates
Slab Resident Resident Women below Others
Senior Citizen 65 years of age
Upto Rs. NIL NIL NIL
160,000
Rs. 160,001 to NIL NIL 10%
190,000
Rs. 190,001 to NIL 10% 10%
240,000
Rs. 240,001 to 10% 10% 10%
500,000
Rs. 500,001 to 20% 20% 20%
to 800,000
Above Rs. 30% 30% 30%
800,000
This change provides the highest tax savings of Rs. 51,500 to persons
earning Rs. 8 Lakhs or more and does not have any benefit to those
earning Rs. 3 Lakh & below. A ready reckoner of how this change
impacts your tax position has been illustrated below.
Taxable Resident Senior Resident Women Others Savings
Income Citizens below 65 years in Tax
F.Y. F.Y. F.Y. F.Y. F.Y. F.Y.
2009-10 2010- 2009-10 2010- 2009-10 2010-
11 11 11

2. 300,000 6,180 6,180 11,330 11,330 14,420 14,420 0
400,000 26,780 16,480 31,930 21,630 35,020 24,720 10,300
500,000 47,380 26,780 52,530 31,930 55,620 35,020 20,600
600,000 78,280 47,380 83,430 52,530 86,520 55,620 30,900
700,000 109,180 67,980 114,330 73,130 117,420 76,220 41,200
800,000 140,080 88,580 145,230 93,730 148,320 96,820 51,500
900,000 170,980 119,480 176,130 124,630 179,220 127,720 51,500
10,00,000 201,880 150,380 207,030 155,530 210,120 158,620 51,500
Relief in taxation of Gifts
The Finance Act (No. 2) of 2009 had enacted a provision that enabled
taxation of gifts of any specified property (including immovable
property) that was received either without any consideration or
inadequate consideration. This position has been modified to include
only such transfers that are without any consideration. A small / token
consideration for such transfer would take such gift out of purview of
taxation. Persons receiving gifts of any specified properties can use
this escape clause to avoid paying tax on assets received.
Exemption from Compulsory Audit
Small business owners & professionals such as Doctors, Lawyers,
Consulting Engineers etc have been provided reprieve from
compulsory tax audit by increasing the turnover criteria. The change in
these qualifying criteria has been mentioned hereunder.
Category F.Y. 2009-10 F.Y. 2010-11
Turnover Applicability Turnover Applicability
(Rs.) of Tax Audit (Rs.) of Tax Audit
Professionals 10,00,000 Yes 15,00,000 Yes
viz.,
Doctors,
Lawyers etc.
Other 40,00,000 Yes 60,00,000 Yes
Professionals
Other 40,00,000 Yes 60,00,000 Yes
Business
Enhanced amount of deductions from your income
The Finance Minister has proposed an enhancement of Rs. 20,000 to
the existing limit of Rs. 1 Lakh under section 80C by way of
investments in Infrastructure Bonds. This deduction will be covered

3. under section 80CCF thus resulting in tax savings of approximate Rs.
6,000 to the persons in the highest tax bracket.
Enhanced scope of health insurance deduction
The scope of deduction under section 80D with regard to health
insurance premium has been extended to contributions made in
Central Government Health Scheme. The efficacy of this scope
enhancement is yet to be verified.
Increase in threshold limits for TDS
Though this may not be relevant or of material impact to most
individuals, we are of the opinion that persons renting their premises
(both residential & commercial) may stand to benefit with
enhancement in the threshold limits to TDS. This amendment would
mainly help individuals / Senior Citizens who may have rent as their
only income. The TDS, which otherwise would have been deducted,
would now be available to such person. This will really financially help
such individuals, who may earlier have had to claim a refund from the
tax department & wait for the same to come for at least a year.
Payment Existing Revised Remarks
Category Threshold (Rs.) Threshold (Rs.)
Rent 120,000 180,000 Rent income to
the extent of
Rs. 15,000 p.m.
would be out of
purview of TDS
@ 10%
Payment to 20,000 (for a 30,000 (for a Small business
contractors single single owners would
transaction) transaction) benefit from
50,000 (for 75,000 (for this increase as
aggregate of aggregate of generally TDS
transactions transactions eats into their
during financial during financial margins
year) year)
Fees for 20,000 30,000 Would not
Professional or impact in a
Technical material way.
services
Insurance 5,000 20,000 Would not

4. Commission impact in a
material way.
This would have
been really
worthwhile if
the threshold
was pegged at a
higher figure as
small insurance
agents would
not reap any
benefit from
this increase.
Now comes the sad part
Service Tax applicable on property renting
Service Tax has been made applicable on all properties let on rent.
This has been amended retrospectively from June 1, 2007. This would
have adverse impact individuals who have substantial income coming
from rental activities (currently in excess of Rs. 10 Lakhs) but would
not affect the small rent earners.
Increase in petrol / diesel price
The central excise duty on petrol & diesel has been enhanced by Re. 1
per litre. This would indirectly impact everyone i.e. not only vehicle
owners directly but also all others as the prices of food items etc will
also resultantly move up.
Increase in Central Excise Duty
An across the board increase of 2% in duty rates would have a telling
effect on prices of all manufactured products. Needless to say cost of
properties, motor vehicles etc would go up steeply for the common
man.
Final Analysis
Though the sad part seems to be small in content, the impact would
be felt deeply by the common man as this has indications of an
inflationary budget.

5. The direct tax proposals would result in a revenue loss of Rs. 26,000
crores to the government but the indirect tax proposals would result in
a gain of Rs. 46,500 crores, thus resulting in an overall gain of Rs.
20,500 crores. If there is an increase in the indirect tax collection then
definitely it would impact the common man being the last line to
absorb such increase.
With the inflation at about 18%, the increased disposable income
available with individuals may tend to increase this further, which
definitely would not be good news in the long run.
Our advice to those of you who directly benefit from the change in the
tax slab would be to get this amount saved on account of tax to invest
this in equity / related investment avenues so that the adverse impact
of increase in product / service prices would be counteracted at least
to some extent.