Budget 2015: Small and mid-income earners gain as FM Jaitley makes super rich taxpayers shell out more

Finance Minister Arun Jaitley’s second budget is a mixed bag for taxpayers. While small and mid-income earners stand to gain due to an additional deduction under Sec 80CCD, super rich taxpayers will have to shell out more tax. The budget has raised the surcharge payable by those reporting an income of more than Rs 1 crore a year. Someone earning Rs 10 lakh a month will have to pay an additional Rs 5,800 in tax every month.

The budget proposes to make the Sukanya Samriddhi Scheme tax free. The scheme, which is eligible for deduction under Sec 80C, offers 9.1 per cent interest compared to the 8.7 per cent offered on the PPF. An SSS account can be opened in the name of a girl child in a post office or authorized bank branch.

The budget also took a baby step towards removing anomalies in tax laws. Tax-free transport allowance limit has been hiked from Rs 800 to Rs 1,600 a month, a move coming after 18 years. The Rs 800 per month limit was set in August 1997. Many other such limits have been left untouched by the minister. The hike in the tax-free limit will cut tax by Rs 2,966 in the highest 30 per cent tax bracket. Tax cut will be lower at Rs 1,978 in 20 per cent tax bracket. In the lowest 10 per cent bracket (those earning up to Rs 5 lakh), tax cut will be limited to Rs 989, or just Rs 82 per month.

The Budget also announced a slew of measures to stamp out black money. PAN has been made mandatory of all transactions above Rs 1 lakh. "This is a right step but implementation holds the key for getting the desired results out of this bold move," says Sudhir Kaushik, co-founder and CFO of tax filing portal Taxspanner.com. The budget has proposed stricter penalties for tax evasion.

Not declaring foreign assets can lead to rigorous imprisonment of up to 10 years and a penalty of 300 per cent of the income sought to be concealed. Even non-filing of tax return or submitting incorrect information in the tax return can lead to imprisonment of up to seven years.

If it is any consolation, the budget has proposed to remove wealth tax, payable if the value of certain unproductive assets (physical gold, vacant house, luxury cars, art and artefacts, yachts, expensive watches and hard cash) exceeds Rs 30 lakh. It is 1 per cent of the value of these assets exceeding Rs 30 lakh. Outstanding loans taken for these assets are deducted while calculating the tax.