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Here's a snapshot of some of the key income-tax provisions impacting a common man:

Fringe Benefit Tax rationalised

Budget for 2005-06 was controversial largely due to the introduction of FBT. Corporates found it tough to absorb the fiscal impact of this new levy, and many employers passed on the burden to their employees, thus adversely impacting their net cash in hand. The Government reviewed the industry considerations with a liberal outlook and has attempted to rationalize the levy of FBT.

Specifically, the following key changes have been proposed in the Budget:

• Tour and travel (including foreign travel) to be valued at 5% (as against 20%)
• "Hospitality" as well as "hotel, lodging and boarding" to be valued at 5% (as against 20%) for airline and shipping industry.
• Transportation facility provided by an employer to its employees for commuting between residence and office exempt from FBT (earlier provided as a relief vide a circular, now specifically included in the law)

However, it needs to be recognized that the above changes still do not make the levy of the FBT in itself valid.

Fillip to savings

Savings by individuals have been given a fillip by the Budget 2006. The Government has acknowledged the importance of savings for the common man - this is evident from the deliberate non-implementation of the much debated EET regime, as strongly recommended by the Kelkar Task Force in the past. Investments on fixed deposits with scheduled banks held by an individual for a period of not less than five years will be eligible for deduction under Section 80C.

Limit of investment under Section 80CCC on contribution to pension funds has been enhanced to Rs 1 lakh from Rs 10,000 (the overall ceiling of Rs 100,000 under Section 80C is however unaltered). This would lead to an overall boost in savings and investments

Employer's superannuation exempt from FBT

Employer's superannuation contribution not exceeding Rs 1 lakh per employee per annum, will now be exempt from FBT.

Banking Cash Transaction Tax to stay

Banking Cash Transaction Tax (BCTT) was introduced with the objective of preventing generation and laundering of black money. The FM reaffirmed his view that this innovative proposal has led to the creation of interesting "tax trails" leading to larger revelations in terms of defrauding the Revenue, and he hence intends to continue with it. Possibly, the introduction of annual information reporting system in the future, would lead to the removal of this levy.

Other salient amendments

Capital Gains exemption

Specific capital gains exemption schemes available for reinvestment of sum received from transfer of long term capital asset under Section 54EC, is now sought to be restricted to reinvestment bonds issued by National Highways Authority and Rural Electrification Corporation Limited.

Securities Transaction Tax

The overall rate for STT is proposed to be raised by 25%.

Medical Insurance

The Budget seeks to widen the scope of exemption available to salaried employees by including medical insurance premia of insurance schemes approved by the Insurance Regulatory Development Authority, as against currently being limited to those approved by the General Insurance Corporation.

PAN & other compliances

Emphasis has been laid on stringent use of PAN by empowering the Revenue to suo motu issue PAN, as well as enforcing specified class of persons to apply for PAN. Filing of returns pursuant to the one-by-six criteria has been dropped. The FM stated that use of technology would be encouraged and soon e-filing of IT returns, e-refunds, etc, would no longer remain mere theoretical concepts. The Bill also contains provisions to enable and facilitate specified class of individual tax payers to file returns using the "Tax Return Preparers".

By and large the changes in the income tax regulations that have been proposed, appear to be in the right direction, and would provide some relief to the common man.

The author is Partner, BMR & Associates

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