The Monsoon Budget 2009 was announced by the Finance Minister (FM), Pranab Mukherjee on 06 July, 2009. The question doing the rounds post Budget is whether the announcements have adequately wet the parched throats of the “Aam Aadmi”, or, like the elusive rains this year, have just caused a ‘drizzle’. Here’s what the Budget cloudburst has in store for the “Aam Aadmi” and the rest of us.

Slab rates and surcharge

While the increase in maximum exemption limit by Rs, 15,000 will save Rs. 1,545 a year for senior citizens; the increase in exemption limit by Rs. 10,000 for others, will save Rs. 1,030 a year. By abolishing surcharge of 10% for high income groups, having income more than Rs.10 Lakhs a year, the FM has surely brought a smile on the faces of the urban upwardly mobile class.

Perquisite taxation

When the FM responded to the industry demand by abolishing the levy of Fringe Benefit tax (FBT), the corporate world’s first reaction was “wow”, “thanks” and perhaps “good riddance to bad rubbish”. However, very few of these corporate honchos may have immediately gauged the exact impact of this announcement on their personal “net take home pay”. Now reality has dawned that, perhaps the FM has played a ‘Houdini Act’ on them, which can pinch them hard.

The fine print gives little clarity on how the provisions relating to the perquisites would be taxed, except stating that contribution to superannuation fund by the employer in excess of Rs 1 Lakh and Employee stock option plans (ESOPs), would be now taxed in the hands of the employees. Now ESOPs will be taxed as a perquisite at the time of exercise of option. This is contrary to the pre-FBT position where Capital Gains Tax was levied at the time of sale of the ESOP shares and there was no perquisite at the time of exercise of ESOPs.

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