Union Budget 2011-12 impact on a common man.

How much you will be benefited with this union budget?? there are positive and negative effects on a common man due to this union budget which I'll try to explain with the help this article.

• Base exemption limit increased - Budget 2011 proposed the increase in base exemption limit for individual from Rs. 160000 to Rs.180000. Which means a tax saving of Rs. 2000 for an individual

Income –tax rates in Budget 2011
Taxable Income	Tax rate
Upto Rs. 180000	Nil
Rs.180001 to Rs.500000	10%
Rs.500001 to Rs.800000	20%
Above 800001	30%

Impact of this move with example :-

Individual other than Women, Senior Citizen and Very Senior Citizen
AY 2010-11 Below 65 Years				AY  2011-12 Below 60 Years
Taxable Income assumed 1000000				Taxable Income assumed 1000000
Slabs	Rates*	Liability		Slabs	Rates*	Liability
0- 160000	Nil	Nil		0- 180000	Nil	Nil
160001 - 500000	10.03%	35020		180001 - 500000	10.03%	32960
500001- 800000	20.06%	61800		500001- 800000	20.06%	61800
Above 800000	30.09%	61800		Above 800000	30.09%	61800
Total tax liability		158620		Total tax liability		156560

*rates are adjusted for education cess

Here, a male individual whose net income is Rs.1000000. As per current tax laws his income tax liability will be Rs 158560 for FY 2010-11, while in the FY 2011-12, once the new exemption limit applies, his tax liability will work out to Rs 156560 i.e saving of Rs 2060. For women, the exemption limit is at the same Rs 190000.

• Senior Citizen - The base exemption was increased to Rs 250000 (from Rs 240000 at present), While the qualifying age for senior citizens was reduced from 65 years to 60 years.

• New Category 'Very Senior Citizen' -  There is a new category of senior citizen called “Very Senior Citizen” in this budget. Any one above 80 years of age will be under this category and they will not be taxed up to the income Rs 500000. While this looks a nice move, but I wonder how many 80 years old will have their personal income more than Rs 500000 in our country to avail this benefit.

• Extension to Infra Bonds for one more year - Government has retained the additional income tax deduction of Rs 20000 under Section 80CCF. Which means that in 2011 – 2012 also you can invest in Infrastructure bonds and save some tax.

• No Tax Return filing if income less than Rs 500000 - From years small tax payers who were having salary less than 5lacs had to go with the cumbersome process of filing tax returns, but now small tax payers who are having income less than Rs 500000 will not have to file their tax returns  if their TDS is cut by employer. But, if someone has additional income from other sources like dividends, capital gains, income from house property etc. In that case they will have to file a tax return themself or need to notify their employer in advance about these additional source of income so that their employer can take these things in consideration and deduct extra TDS.

• Insurance policies to get expensive excluding Term Insurance - Service tax on insurance policies which have investment component means ULIP's, Endownment plans, Money Back plans and return of premium term insurance plan will have a higher service tax on the premiums.  Earlier there was a 1% service tax but now it has been raised by 0.5% i.e 1.5%. Which means that if an individual insurance premium is Rs. 50000 in ULIP, then service tax was Rs 500 earlier but now its going to be Rs 750.

• Hotels, Restaurant, Air-travel and Medical become expensive - Expensive Air-travel, hotels, restaurant and medical become more expensive now due to some changes in budget which are: Hotel Accommodation - in excess of declared tariff of Rs 1000 per ay with an abatement of 50%, so that the effective burden is only 5% of the  amount charged. Restaurant - Service provided by air-conditioned restaurants that have license to serve liquor, by giving an abatement of 70%, so that the effective burden will be 3% of total bill amount. Air-travel- Service tax on domestic air travel levied at Rs 50, while Rs 250 on international journeys by economy class. Also it has been proposed to tax travel by higher classes on domestic sector at the standard rate of 10%, thus brining it on par with journeys by higher classes on international air travel. Hospitals - with 25 or more beds that have the facility of central air-conditioning and which are providing high-end treatment, however after providing an abatement of 50% the actual burden is kept at 5% of the value of service. 
  

• Daily Items get expensive - Excise duty of 1% levied on 130 items which includes day-to-day itmes like tea, coffee , ketchups, mobile phones and other lind of food mixes even ready to eat package foods.

• DTC will be finalized for enacting and will be proposed with effect from 1st April 2012. 

• New Pension Scheme - 'Swavalamban' where the minimum contribution is Rs 1000 and a maximum contribution of Rs 12000 per annum during the FY 2010-11, the Government has proposed to relax the age of exit from 60 years to 50 years, or the minimum tenure for 20years, whichever is later.  Government has also proposed to extend the benefit of government contribution from 3 to 5 years for all subscribers of 'Swavalamban' who enroll during 2010-11 and 2011-12.