01 Mar, 2015 01:05 PM

Finance Minister, you are wrong on the tax benefit statement

The finance minister Arun Jaitley during the course of his budget speech today remarked: “After taking into account the tax concession given to middle class tax payers in my last Budget and this Budget, today an individual tax payer will get tax benefit of Rs 4,44,200.”

The details are provided in the annexure to the budget speech (which is reproduced below).

Deduction u/s 80C	1,50,000
Deduction u/s 80CCD	50,000
Deduction on account of interest on house property loan (Self occupied property)	2,00,000
Deduction u/s 80D on health insurance premium	25,000
Exemption of transport allowance	19,200
Total	4,44,200

This figure is not the tax benefit, but the maximum deductions possible. The benefits depend on which tax slab one belongs to. In the 10.3% tax bracket it will be saving of Rs 45,752.6. In the 20.6% tax bracket tax savings will be Rs 91,505.2 and in the 30.9% it will be Rs 1,37,257.8.

The statement FM made was as if the benefit was given in this budget. All these tax deductions have been around for a while. This year, the deduction on health insurance premium has been increased by Rs 10,000 Rs 25,000. A deduction of Rs 50,000 was added for investments made into the New Pension Scheme. The transport allowance allowed as an exemption has been increased by Rs 9,600 to Rs 19,200. These figures sum up to Rs. 79,200. This will yield a tax benefit of only Rs. 8158, Rs. 16315 and Rs. 24472 for the 10.3%, 20.6% and 30.9% tax slabs

In the last year's budget deduction allowed under Section 80 C was increased from Rs 1 lakh to Rs 1.5 lakh and the deduction allowed for interest being paid on a home loan for self occupied property was increased from Rs 1.5 lakh to Rs 2 lakh.

The extra deductions in the last two budgets is Rs 1,69,600 .(Rs 50,000 extra for Section 80C + Rs 50,000 extra for investing in NPS + Rs 50,000 extra for interest paid on a home loan + Rs 10,000 extra on health insurance premium + Rs 9,600 extra on transport allowance). For those in the 10.3% tax bracket this works out to a savings Rs 17,407. For those in the 20.6% it will be Rs 34,814 and Rs 52,221 for those in 30.9% bracket.

The stated benefits are if you are availing all deductions . i.e. you have a medical policy with premium 25,000/- , you have taken home loan and paying interest of Rs. 2 lakhs and above, have made savings of 1.5 Lakhs and you NPS contribution is above Rs. 50,000.