Save for the marginal change in the basic exemption limit, which has been increased by Rs 10,000 to Rs 110,000, the tax rates and slabs are proposed to be maintained at the existing level.

The special basic exemption limit applicable to women below 65 years and senior citizens will be revised to Rs 145,000 and Rs 195,000 respectively reflecting the additional benefit of Rs 10,000.

The government plans to use the amount collected from this cess to finance secondary and higher education in India. This cess will hike the maximum marginal tax rate of the individual to 33.99% from the current level of 33.66%.

The following chart illustrates the likely impact of the proposed changes on the individual tax liability at certain income levels:

Health Insurance Premium

The deduction under Section 80D of the Income Tax Act  will be increased to Rs 15,000 from the current level of Rs 10,000. Consequent to this, the limit for senior citizens will also be increased by Rs 15,000 to Rs 20,000.

Loans for Higher Education

The interest paid by an individual towards loan taken by him from any financial institution or approved charitable institution for higher education is currently being allowed as a deduction over a period of eight years.

Other Aspects

Some significant changes proposed under the various heads of income that could have a bearing on taxation of individuals are summarized below:

Salary Income

Hitherto, the benefit derived by the employees on stock option income has been taxed only at the time of sale of shares by the employees if the stock plan is compliant with the guidelines issued by the Government, and there is no tax payable by the employer or employee on exercise of shares.

Since the tax laws provide for complete exemption/concession on sale of listed company’s shares in India based on the period of holding of shares, at times, the employees were able to enjoy significant tax benefit through a stock option arrangement.