Hike in I-T exemption limit of not much help

NOT MUCH: Senior citizens get a tax saving of Rs 1,500 to Rs 4,500, for the rest it's Rs 1000 to Rs 3000.

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New Delhi: Finance Minister Pranab Mukherjee announced hordes of tax benefits but the taxpayers are still not celebrating.

The Fringe Benefit Tax (FBT) may have been scrapped but that is good news only for the employers and not the employees.

Many items that were taxable as FBT will now be subjected to perk tax in the hands of the employees.

Earlier, in the case of Employee Stock Options (ESOPs) companies had to pay FBT at the time of the employee getting vested with the shares though all employers passed on the tax burden to the employees.

But with the FBT gone, the employee has to instead pay a perquisite tax at the time of the shares getting vested. On sale of shares capital gains tax will be payable.

Capital gains will be calculated on the difference between the sale prices of the shares as reduced by the Fair Market Value.

So how much money you will be saving with some of the tax benefits.

As calculations started after the tax sops were announced, many found out that the budgetary provisions are high on goodwill but short on liquidity.

Mukherjee announced a hike in the income tax exemption limit by Rs 10,000 for men and women and Rs 15,000 for senior citizens.

This means is that while senior citizens get a tax saving of Rs 1,500 to Rs 4,500, for the rest it's Rs 1000 to Rs 3000.

"I think it would have been better if the Government had the Left Front. Last time we got the tax benefit and exemption of Rs 40,000. Now it is just Rs 10,000 which comes to only Rs 1,000 to Rs 3,000 for individuals, Hindu Undivided Families and women tax payers. But senior tax payers will gain a little more," tax expert Subash Lakhotia said.

The additional advantage for those whose income exceeds Rs 10 lakh per annum is the removal of 10 per cent surcharge on personal income tax.

So while Rs 10 lakh salary means a saving of Rs 30,000, a person drawing Rs 50 lakh a year pockets Rs 1.5 lakh.

As far as roll back of FBT is concerned individuals earning up to Rs 3 lakh per annum can still save as much as Rs 21,000 and those earning Rs 7 lakh can save Rs 49,000 on average by not shelling out FBT.

But ESPOs and superannuation may be taxed as perks.

Those questioning this Budget's middle class credentials may just be right as the numbers point out to a more upper middle class Budget.