New Delhi, Aug. 26: Finance minister P. Chidambaram today came out with a small relief for middle-class taxpayers earning up to Rs 1,11,250 a year, correcting an anomaly in his earlier tax proposals.
The Lok Sabha passed the Finance Bill without debate because of an Opposition boycott.
Chidambaram’s original tax proposals had created a piquant situation where those earning up to Rs 1 lakh were able to retain the whole amount net of taxes, but those earning marginally more were actually taking home far less than Rs 1 lakh.
The amendments he brought in today ensured that those who earn up to Rs 1,11,250 a year will not have a post-tax income which is less than Rs 1 lakh — the amount a person earning Rs 1 lakh a year is allowed to take home as he faces no tax.
Those earning more than Rs 1,11,250 a year will carry home more than Rs 1 lakh after taxes.
While correcting the anomaly, the government said it would stand to lose Rs 300 crore in tax revenues.
Speaker Somnath Chatterjee said he was saddened to see that the Finance Bill was being passed without debate because of an unprecedented boycott by the Opposition. The Upper House also cleared the bill without a debate.
Soon after the bill was passed, Chidambaram told reporters that he had tried to address concerns voiced “in various quarters” through the amendments he brought in today.
He clarified that gifts above the value of Rs 25,000 from unrelated persons would be tax-free if presented as marriage gifts, through a will or by way of inheritance or “in contemplation of death”.
His amendments also increased the ambit of the term relatives to include spouse, brother, sister of the individual or spouse, any lineal descendant or predecessor of the individual or spouse, or spouse of any of the persons named above.
The finance minister clarified that information will be sought from tax assessees only for high-value transactions. Ministry officials added that the qualifying limit for such transactions would be defined at a later date.
Amendments have also been made to incorporate the changes already announced in the securities transactions tax. Tax exemption on payments for aircraft leased after September 1, 2004, which was to be scrapped, will now be withdrawn for those aircraft rented after April 1, 2005.