Font Size 
How much does the Budget give in your wallet?
Published on Sat, Mar 01, 2008 at 00:58, Updated at Sat, Mar 01, 2008 in 
Tags: 
LESS TAXING: A panel of experts demystifies what Budget 2008 means to your wallet and your money.
Other stories in the section:
Realty bug bites NRIs, property turns hot investment
Many NRIs are now investing in property back home.
Featured Blog
Featured Slideshows
Union Finance Minister P Chidambaram on Friday put more money in your wallet through income tax benefits, but at the same time he nudged citizens to invest in equity for the long term by hiking the short-term capital gains tax while leaving all tax exemptions under 80C untouched.
What are the implications of these new tax laws on your personal finance?
A panel of experts comprising income-tax expert Subhash Lakhotia, MD and CEO of ICICI Prudential Life Insurance Shikha Sharma and HDFC Mutual Fund MD Milind Barve demystified what Budget 2008 means to your wallet and your money on CNN-IBN's special show Budget and Personal Finance.
The show was moderated by CNBC TV18's Senior Editor-Anchor Vivek Law. Here is how the experts answered some of the questions that the common tax-payer is asking after this Budget.
More money in your hands thanks to the higher tax slabs. But what is the actual benefit for the tax-payer?
Subhash Lakhotia: First of all, it's a happy news for all sections of tax-payers. Be it individual tax-payers, women tax-payers or senior citizens, this will mean big tax saving for all. This is the first time in the history of Budgeting in India that we have seen a provision where in one Finance Bill itself, the exemption limits have been raised in such a large scale and tax slabs restructured.
This will reduce the incidence of income tax for all categories of individual tax-payers. In case of an individual tax-payer, the minimum tax saving will be to the tune of Rs 4,120 (i.e for income between Rs 1.5 - 3 lakh). If the income is Rs 5 lakh and above, the saving will be as high as Rs 45,320, inclusive of education cess.
For women tax-payers, the minimum tax saving will now be Rs 6,695. If she has an income above Rs 5 lakh, the income tax saving will be Rs 44,800. As for senior citizens, the minimum tax saving will be Rs 6,180 while in case of income of Rs 5 lakh and above, the tax saving will be 48,000.
What are the benefits under Section 80D, which is for health insurance. Earlier 80D used to have a limit of Rs 15,000. But now the Budget has a provision under which if one buys a health insurance policy for parents, he/she can claim tax benefit on the same. And if the parents happen to be senior citizens, the limit is up to Rs 20,000.
Subhash Lakhotia: Under the existing provision, you can claim benefit for up to Rs 15,000 for health insurance policies for spouse, children and parents. If the parents happen to be senior citizens, the limit goes up to Rs 20,000.
But under the new law, the Rs 15,000 limit is now for spouse and children while there is a new provision for an additional Rs 15,000 for parents, which add up to a total of Rs 30,000. If the parents are senior citizens, then the additional benefit on parents can go up to Rs 20,000, which add up to Rs 35,000. This amount is going to be a straight deduction from the annual income.
Now, if this is added to the provisions under the new tax slabs, the minimum amount of extra saving on the tax front goes up to Rs 10,000 along with deductions under Section 80D.
Moreover, this Budget has removed a special condition. Earlier the law was that for one to claim tax benefit under Sec 80D, the parents have to be dependent on the tax-payer. Now, they don't have to be dependent and they may have separate incomes and both sides can claim separate deductions as well.
Does this mean good news for health news insurance companies? Will more people now make health insurance a part of their financial planning?
Shikha Sharma: This is indeed a good news for the tax-payers as well as for the health insurance sector now that Budget incentivises people to buy health insurance. But if one looks at the products available in the market today, there are very few products which will cost that much.
Also, there are very few products in the market targeted towards senior citizens. This Budget announcement will now spur a lot more thinking on the part of health insurers to come up with products which are appropriate for senior citizens, which provide more comprehensive coverage and, therefore, likely to be more expensive.
Does it now make a lot of sense to buy a health insurance for your parents even though the premiums are higher as it allows you to take back that much money through tax benefit?
Shikha Sharma: Absolutely. The logic for this is if you look at the cost of a health insurance plan for a 30-year-old vis-à-vis a 60-year-old, the difference in cost is about 3 to 3.5 times. So, there is a very strong logic that the deductions for the health insurance premium for a senior citizen should be much high than it is for a younger person.
The other thought that went behind this is that as the whole industry is developing, if people are not being able to buy health insurance for senior citizens, that is because they simply may not afford the high cost. So, we now have two engines to finance it — the senior citizen himself plus the children who may have some more disposable income in their hands.
More Headlines from Tax
| Related links: | |
Total Comments: 1
Read Comment | Post Comment
Hi,All the slab annoncement made by the Finance minister seems to a be a Election advertisement because today i my
Read Comment