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Budget 2010: Income Tax Comparison between 2010 and 2009




Dr Pranab Mukherjee presented the budget today for this year. And, like all years, the one thing that Aam Aadmi like me looks in the budget is Income Tax related changes.
This year also Pranab da changed few things in Income tax which actually looks good to me so far.
  • One of my favourite finance bloggers Deepak put a very basic tax calculator / comparison tool where you can compare how much benefit or tax saving you will have this year viz-a-viz last year.
I took lead from him and put my own excel to chart out the differences for INDIAN MAN having annual taxable income between 2.5L to 10L . (emphasis is on “MAN” as women and senior citizens have slightly different income tax rates)
The results of this excel may not be rocket science, but to the excel fanatic I am – it provides a easy to understand representation of how this budget benefits different income slabs in India. (like they say – I am the “visual” kind of person)
Here is Income Tax Slab for last year [Source:wiki]
  • No income tax is applicable on all income up to Rs. 1,60,000 per year. (Rs. 1,90,000 for women and Rs. 2,40,000 for senior citizens)
  • From 1,60,001 to 3,00,000 : 10% of amount greater than Rs. 1,60,000 (Lower limit changes appropriately for women and senior citizens)
  • From 3,00,001 to 5,00,000 : 20% of amount greater than Rs. 3,00,000 + 14,000 (slightly less for women and further less for senior citizens)
  • Above 5,00,000 : 30% of amount greater than Rs. 5,00,000 + 54,000 (slightly less for women and further less for senior citizens)
And the new announced tax slabs for 2010-11 are as follows:
  • No income tax is applicable on all income up to Rs. 1,60,000 per year.
  • From 1,60,001 to 5,00,000 : 10% of amount greater than Rs. 1,60,000
  • From 5,00,001 to 8,00,000 : 20% of amount greater than Rs. 5,00,000 + 34,000
  • Above 8,00,000 : 30% of amount greater than Rs. 8,00,000 + 94,000
Note – there is one interesting thing I noticed this time that there is no “women” or “senior citizen” specific announcements this year. No comments on that for now.
Before we proceed any further, the usual Disclaimer: This is NOT tax advice. This is educational material only. Use your own mind before you make any decisions. I am anything but not a tax expert :)
Few other things to note-
1. This excel is based on Taxable Income – so it is not your Gross Salary or CTC.
To explain this, say you are getting a salary of 5 Lakhs per annum, but you have invested 1 Lakh in Section 80c and 1 Lakh as Home Loan Interest. That means your taxable income is 3 Lakhs per annum (not 5 Lakhs).
2. In my excel I have not factored in the additional Rs 20,000 tax deduction announced today related to Infrastructure bonds. That will surely put additional tax benefits on your hand, in my opinion lots of people will utilize that to lower their taxable income by additional Rs 20K.
So, whatever … the thing we all love about excel is you can printout charts to visualize things – so the first chart I pulled out was to show how much additional income people will get per month in their paychecks.
As you can see, anyone earning below 3 Lakhs will NOT get any additional money on their hand this year compared to last year. (on a sidenote that means this budget should NOT be nicknamed “Aam Aadmi Budget”, because that will infer that “Aam Aadmi = people having taxable income more than 3 Lakhs” – which I think is far from the reality… isnt it :-))
The good news – everyone above 3 Lakhs per annum will get some benefit on his take home salary, which will keep increasing till 8 Lakhs per annum and then will go constant at Annual benefit of Rs 51,500
Other thing I calculated was “Effective Tax%age” which is by dividing “Annual Tax” to that of “Annual taxable income”.
On that I noticed that people having taxable income 3L will get 0.33% benefit this year – last year they were paying 5.32% tax (effectively) and this year they will be paying 4.98% (effectively)
That will keep growing till 8L income when people will have 6.44% benefit!! – last year they were paying 18.54% tax (effectively) and this year they will be paying 12.10% (effectively)
After that since the tax amount remains constant, but the base increases … so the “Effective Tax %age Difference” comes down, but still it means everyone above 8L taxable income will get Annual benefit of Rs 51,500
I think there are other parts of the Budget which I will blog about in coming days… but that’s it for a Friday evening.

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