Standard deduction for salaried employees may return
Written by Administrator on June 3rd, 2009Ahead of the annual budget, here’s some cheer for salaried employees and pensioners. The finance ministry is considering bringing back standard deduction of up to Rs 20,000 in individual taxable incomes.
According to revenue department officials, the government may be willing to take a small hit in return for a spike in spending that it hopes will result from a bigger disposable income with the salaried classes.
Till the budget for 2005-06, a standard deduction of Rs 30,000 or 40 per cent of income, whichever was lower, was allowed to salaried employees with an annual income between Rs 75,000 and Rs 5 lakh. For those earning more, the standard deduction was fixed at Rs 20,000.
The standard deduction was meant to compensate salaried people for the fact that self-employed small business persons or entrepreneurs paid tax only on their net income after deducting business expenditure.
Industry has been demanding the re-introduction of standard deduction so that individual taxpayers are able to spend more and stimulate domestic demand. As Indira Gandhi’s finance minister, Pranab Mukherjee had in fact, raised it from Rs 5,000 to Rs 6,000 in the budget for 1983-84.
“There are two ways of looking at reducing personal tax. One option before the government is to do away with surcharges. The other option would be to give relief to individual earnings up to a particular level. In other words, keeping in mind fiscal deficit constraints, the benefit could be extended to only lower income earners.
This would help reduce administrative burden of the department and focus on the big fish,” said Sudhir Kapadia, Partner, Taxation, Ernst & Young. P Chidambaram had as finance minister removed the standard deduction after overhauling tax slabs and raising the exemption limit to Rs 1 lakh. He had introduced three slabs of 10 per cent, 20 per cent and 30 per cent for individuals in the Rs 1 lakh to Rs 1.5 lakh income bracket, Rs 1.5 lakh to Rs 2.5 lakh and over Rs 2.5 lakh respectively.
Source: The Indian Express
“Standard deduction should be restored,” the Institute of Chartered Accountants of India (ICAI) said in its pre-Budget memorandum to the government.
June 5th, 2009 at 10:40 am
Income Tax burden on salaried class
The Govt. is taking about reintroduction of Standard Deduction. But the fact is that the Govt. should abolish the Income Tax to all Govt. salaried class. Please read this to the end to understand the concept in detail.
The income tax payers can broadly be classified in to three categories: Salaried class, General Public and Business class.
Salaried class: Salary is the only source of income and taxes are deducted at source without any mercy. All salaried class govt. employees are paying nearly 30% of their salary in the form of TDS. Apart from this the salaried class employees are bound to pay additional taxes of 10 to 15% out of their 70% earnings for their day to day leaving. These are the taxes that are levied on all right from a drop of water to all consumables, as nothing is tax free.
General Public: Like all citizens of independent India they are paying 10 to 15% out of their earnings for their day to day leaving.
Business Class: Like all citizens of independent India they are paying 10 to 15% out of their earnings for their day to day leaving. These classes of people are getting benefit out of this taxation system by collecting taxes not only on products but also on their profit margins.
Ex. A factory item which is sold by the factory for about Rs. 1000 is taxed by the Govt. to the tune of 10 to 15% to the distributor, which only goes to the Govt. The distributor adds profit (10%) to this item and sells it to the whole seller for Rs.1100 and collects taxes for Rs.1100 instead of Rs.1000. Where as the whole seller again adds his profit of (10-20%) to his cost price and sells it at Rs.1220 and taxes are collected for Rs.1220. This intern is sold by the retailer adding his part of profit (10-20%) to the consumer for Rs.1440. Hence the tax on Rs. 440 goes to the business tycoons and the poor Govt. only gets his share for Rs. 1000 at the rate of 10-15%. Nearly 50% of Govt.’s shares of taxes are being swallowed by business class.
As everybody is paying the maximum tax of 10-15% to the Govt. compulsorily for the day to day living please tell me why a salaried class of Govt. employee should pay the taxes to the tune of (30% + 10-15%) amounting to 40-45% of their income as taxes.
In the above contexts which are true the Govt. should abolish Income Tax in total to all Govt. salaried class employees.
June 18th, 2009 at 3:35 pm
sir, i’ve already submitted my problem about acp on 2-2-2007 regarding my pay band and grade pay. i got acp on 2-2-2007 after completion of 24 years service in the scale 5000-150-8000 from 4000-100-6000. my institute has given me grade pay 2800/-.the modified has not declared at that time, but recently it has been declared by the govt. of india. sir, my initial appointment on 2-2-1983 in ldc,i got on promotion on 16-01-1996, kindly inform me in my email no. what will be my exact pay band and grade pay, waiting for your early reply, thanks.