Income Tax: Exemption limit raised to Rs. 1.8 lakh

The finance minister today increased the exemption limit in income tax by Rs. 20,000 to tax payers. That translates into a relief of Rs. 2,000 in income tax for all tax payers, irrespective of their tax slab.

The FM has created a new category for very senior citizens who will now get complete exemption on incomes over Rs. 5 lakh. People who are 80 years or older fall in the category of very senior citizens.

The finance minister has also hiked the minimum alternate tax from 18 per cent to 18.5 per cent. Last year the MAT was hiked from 15 to 18 per cent. This is a negative for Corporates. However, the FM has also cut the surcharge on domestic companies to 5 per cent from the existing 7.5 per cent.

The FM said that the central excise rate has been retained at 10 per cent. Excise duty applies to virtually all manufactured goods. There was expectation that the FM might hike the excise duty by 2 per cent this year.

The FM has also included 130 items under excise duty that were earlier exempt. However, these items would be charged a levy of 1 per cent.

The FM has also retained the service tax at 10 per cent. Analysts had earlier said the FM might hike the services tax to 12 per cent to bring it to pre-recession levels. However, the service tax on international air travel has been hiked by 2.5 per cent.

The FM has exempted the cold storage equipment from excise duty. Also, the customs duty on micro irrigation equipment has been cut to 5 per cent from 7.4 per cent. The import duty on farm equipment has been lowered from 5 per cent to 2.5 per cent.