Middle path

Contrary to expectations, the FY14 Budget hardly holds any cheer for the middle class from the personal tax perspective as the finance minister's hands were tied. The FM provided a marginal tax relief of R2,060 for individuals who are in the lower income bracket. He provided a tax rebate of R2,000 for a resident individual with an income of up to R5 lakh, which is an effective tax benefit of only R2,060. This relief is expected to benefit 1.8 crore taxpayers.

However, taxpayers with income between R5 lakh and R1 crore don’t get any benefit.

Similarly, the Budget proposes to amend RGESS to make it more lucrative for retail investors. The amended scheme proposes to allow first-time retail investors to invest their funds not just in listed shares, but also in listed units of equity oriented mutual funds. Also, tax benefit would now be available for three consecutive years, instead of one year. The eligibility criteria is relaxed and people with income up to R12 lakh can invest up to R50,000 and claim 50% tax deduction on the amount invested.

In fact, in the existing structure, an investor can get a maximum tax saving of R5,150 for one year. In the proposed structure, the maximum tax saving will be R7,725 every year for three years. Taxpayers should use the savings proposed by the finance minister of R2,060

... contd.