13 important points from Budget 2012

POSTED BY Jagoinvestor ON March 17, 2012 COMMENTS (169)

Budget 2012 was out yesterday and within minutes, it was clear that almost all the people were disappointed, but then Sachin’s century made sure that every one was back in mood and were able to sleep happily by the end of the day. I looked at various articles on budget which were flooding every minute. I didn’t hurry to post this article, because I wanted the dust to settle down and then come up with only those major points which you can consume, understand and which really matters to you. So I read this budget memorandum for some points which had confusion and came up with 13 points which really concerns most of you.

Union Budget 2012

The budget did not live upto the expectations of many people because rising inflation had created an expectation among people that this time they will get some major relief from taxation and were expecting exemptions upto 3 lacs income and big raise in 80C limit. But Congress made sure that they lose and waste this last change which they had to give people a small reason to like them. What a waste of this golden opportunity they had. Anyways, lets keep aside things and get to the top most points I extracted for you from the budget 2012.

1. Change in Tax Slabs

The minimum taxable income on which tax has to be paid was increased from 1.8 lacs to 2 lacs, so the new slab is as follows – Nil tax between 0-2 lacs income, 10% tax between 2-5 lacs, 20% tax between 5-10 lacs and 30% tax above 10 lacs income. The taxable limit for men and women is same, which is 2 lacs, but the limit for senior citizens (above 60 yrs) is 2.5 lacs and for very senior citizen (above 80 yrs) is 5 lacs. No change in that. This means that most of the people will save additional Rs 2,000 on tax outgo , thats all . Not a big deal ! .

2. DTC not coming this year, hence ELSS gets one more year

DTC (Direct tax code) will not be implemented this year, which was very obvious – thanks to Anna Hazare, Food security bill and other issues which made sure govt has no time for DTC . What this means is that Tax Saving Mutual funds (ELSS) are still a tax saving option for 2012-2013 and you can invest in them and claim tax benefit next year also.

3. EPF (Provided Fund) Interest cut from 9.5% to 8.25%  

EPF interest rate cut was not part of this Budget 2012, but it happened just one day before Budget, and as this is an important update, you better know that EPF interest rate is reduced from 9.5% to 8.25% now and it will be applicable from next year. Last year itself the EPF interest rate was increased to 9.5% .  This is a very steep cut and really wont make any salaried person happy. Not sure what is the reason to keep it below PPF interest rates. Anyways – you cant do anything about it – Bite the bullet ! .

4. Income tax exemption for health check-ups upto Rs 5,000 under section 80D

A new kind of deduction called “preventive health checkup” is included under section 80D . Till now you were able to claim Rs 15,000 for the medical insurance premium paid for self, spouse and dependent children, but now you can also include health checkup cost upto Rs 5,000. But note that this is included in Rs 15,000 limit and not additional one. You can make cash payments for these checkup’s.

5. Tax exemption for Direct Equity Investments if income is less than 10 lacs

Just like the above point a new tax deduction is introduced for direct equity investments, Its called as “Rajiv Gandhi Equity Saving Scheme” – under which a new equity investor will be able to claim 50% of his investments in direct equity upto the maximum investment limit of 50,000. This investment would be subject to 3 yrs lock in period (just like ELSS) . However this will be available to only those whose taxable income is below 10 lacs. There are 3 questions which I am not clear about and I want to know. a) Is it only for direct stocks or even equity mutual funds ? b) Is it only for those who will invest for the first time in equity because the rule mentions “new retail investor” . c) How will they make sure that a person does not sell his shares before 3 yrs, will this limit be from demat provider ? Will get more clarity on this in coming days ! . Read more on Rajiv Gandhi Equity Saving Scheme from Subra ! 

6. Tax exemptions on Saving bank interest upto Rs 10,000 

Till now all the interest income earned from your saving bank was taxable. However now saving bank interest income upto Rs 10,000 will not be taxed. Not that it is applicable for Saving bank account, Post Office Saving account and all co-operative bank accounts. But I doubt how many people will really be able to take full benefit of it, because to earn 10,000 interest in saving bank, you need to keep anywhere close to 2 lacs or 2.5 lacs, which does not happen with most of the people. A lot of people anyways never paid any tax on the interest from saving bank and might be fearful if some one catches them, now law itself asks them now to pay upto 10,000 , I can see some witty smiling faces 🙂 . Also dont confuse this with interest earned on your Fixed Deposit, that is still taxable!

7. Life Insurance deduction available only if premiums are below 10% of Sum Assured

This is a little hidden clause and not highlighted by media, but as per the budget 2012, any life insurance policy issued on or after 1st Apr 2012, will be eligible for “tax exemption each year [80C] and “no tax on maturity [section 10(10D) ]” only if the yearly premium in all the years are below 10% of Sum Assured. Currently this percentage is 20%. So for example if you buy a life insurance policy with premium of Rs 20,000 for a Sum Assured of Rs 1,00,000, then it will not qualify for tax exemptions because here premium is 20% of sum assured. However existing policy holders dont have to worry about this, their policies wont be affected.

8. Securities Transaction Tax (STT) reduced from 0.125% to 0.1% 

Whenever an equity transaction is done, STT transaction tax is applicable and you have to pay it. It was 1.25% earliar, but now its reduced to 1%. So it means you will have to pay less for your equity transactions. Good for those who buy/sell stocks/mutual funds frequently or in big quantities.

9. Service Tax increased from 10% to 12% 

This move should worry you, because with increase in service tax, your bills for telephone, internet, hotel stay, eating out at restaurants, flying by air and several other kind of services will cost a little more, because we all pay service tax on all these things. So as service tax is increased from 10% to 12%, we will pay 2% more on the bill amount. This will add up to a good enough amount in whole year even though it does not bite you in small installments. Surprise! – Be ready to pay more for your Life Insurance and Health insurance premiums also, because we pay service tax on the premiums too. As per a rough estimate for most of the urban class people like you and me, the additional service tax we will pay due to this will cancel out that Rs 2,000 additional tax saving which happened due to increase in tax limit.

10. TDS @1% at the time of real estate sale above 50 lacs

A lot of people will cry hearing this one and will not appreciate this move by govt, but it’s for good. As per this budget 2012, now whenever you sell your residential flat/house/plot (any kind of real estate) and the selling price is more than 50 lacs, you will have to compulsorily pay TDS @1% . This is actually a big problem, because it might happen that even though the sale value is above 50 lacs, but after indexation and your decision to use the funds in next house purchase, your overall tax out of the transaction might be Zero, but still you will have to pay 1% TDS. So in worst case you will have to claim that tax amount back by filing a return. Note that property registration will not be permitted without proof of deduction and payment of this TDS , so you cant escape it, incase you thought you thought you will escape somehow. All the registration offices across the country will be following this one.

11. Increase in Excise Duty from 10% to 12% 

Excise duty is the tax paid by manufacturers on production of any kind of goods. So now that is increased from 10% to 12%. So it means that manufacturers pay more tax and recover that same additional burden from consumers, which in turn means that a lot of goods will get costlier, it would include daily use items and what we consume in day-to-day life. Anyways – you never realise this as consumer 🙂 because instead of increasing the price, they reduce the weight of the product, I hope you know that the Maggi packs which used to be 100 gms , are now 90 gm from many years and still costs Rs 10 and you were so happy all these days! .

12. For Medical Insurance – Senior citizen age reduced from 65 yrs to 60 yrs

In the last budget the age for senior citizen was reduced from 65 yrs to 60 yrs, but it was not applicable for sec 80D and 80DDB.  Till now people above 65 yrs old were considered as senior citizens in case of medical insurance deduction, but in this budget, that rule is amended and anyone above 60 yrs will be considered as senior citizen. Infact now for all the taxation purposes, senior citizen age is above 60 yrs. In case of Sec 80DDB , the deduction up to Rs. 40,000/- for the medical treatment of a specified disease or ailment is allowed.

13. Tax Benefit on Infrastructure bonds removed

2 yrs back Tax Saving Infrastructure bonds were introduced and apart from 80C (1,00,000), additional 20,000 was eligible for tax exemption. However this year this benefit is not extended and now there is no tax exemption on Infrastructure bonds. However companies are allowed to issue 60,000 crore worth of bonds compared to 30,000 crore worth bond last year. However I doubt if the excitement this time will be very high as it was last year. (source)

Some Other Changes in Budget 2012

  • No Advance Tax for Senior Citizens if no income under head “Income from Business” .
  • The amount of goods you can bring from outside India increased to Rs. 35,000 from the earlier Rs. 25,000 .
  • Tax filing compulsory for any resident who holds a property outside India even if the taxable income in India is below the limit.
  • Under Section 80G, any donation made above 10,000 has to be done by any mode other than cash. Till now you could donate through cash by cash, but now that limit is there.

How do you rate this budget 2012 and are you happy with it ? What as per you was that one thing which budget should have this year ?

169 replies on this article “13 important points from Budget 2012”

  1. Kharabela says:

    Manishji Namaskar
    Thanx a lot for putting so much effort for us. Could you advice me a good term plan for 50 lacs and a pension plan.

    Thanking you
    with best regards

    1. FOr term plan you can look at Aviva , kotak .. and for pension plan , see this – http://jagoinvestor.dev.diginnovators.site/2011/10/pension-plans-drawbacks.html

  2. Kunal says:

    I need clarifictaions for:

    1. I have a NPS Tier1 Account and I pay towards it annually to accumulate pension. Under which section can I claim exeptiom for this payment made?

    2. Did the Fin Min introduce any new plans to save tax as Infra bonds under sec 80CCF is withdrawn?


    1. NPS is under 80C, thats confirmed, so dont worry on the section part . The infra bonds are just removed from the tax deductions list now

  3. ashok says:

    Can you mail me IT and DTC its changes and impact on income from other source

    1. DTC is still not out !

  4. Akansha says:

    Great work. Helped me a lot in my presentation in college. Thanks

  5. Vaibhav says:

    Few questions regarding section 80D – Preventive health checkup:

    1) Do i need to have bills for this? Bcoz very often if one goes for a general checkup to ur family physician, u pay in cash but he doesn’t give u a receipt for the same. And does it also include costs for any tests suggested by the physician during checkup (such as any blood tests/x-rays)?
    2) Since it allows me to pay for Preventive health checkup of my parent too, Consider this –
    Me & my mother r both tax payers. So I can claim checkup costs for me (5000) + my mom (5000) = total 10000 deduction while filing my return. At the same time, if my mom does another additional checkup, she can also claim Rs.5000 while filing her return.
    Is this correct?


    1. Vaibhav

      Yes you need to have a bill, if you dont have it , then how do you prove you paid for it ? Also preventive healthcare checkup means any checkup which you are doing to just check few basic things like overall heath checkup , blood check , ECG etc etc . You can claim upto 5k for your parents combined ,not 5k for each , they can also claim it for themselves


      1. Vaibhav says:

        Thanks Manish!

  6. Sanjeev Kumar says:

    Hi manish, thanks for the sort and useful description of the budget. I just want to know from you how much a person can save after 200000/ limit without paying tax. If I am write, then is the following detail ok.
    1. 200 000/- according to the tax slab.
    2. 100,000/- according to the section 80 c including PF, life insurance policies, Post office, FD etcs.
    3. 15000/- medical insurance policy or (10,000+5000) medical insurance policity+preventive medical check up.
    4. 15000/- for dependent medical insurance policy or 20,000 for senior citizen dependent medical insurance premium.
    5. 10,000/- interset from the saving bank account.
    6. Rajeev Gandhi equity saving scheme 50,000/-
    If I am right, then the total amount without tax is 3, 95,000/-.
    Is there any other rule to save the money without tax, as my gross income for a year is close to 5,00,000/-


  7. Tarun Dua says:

    Hi Manish,

    Could you tell me, what are the documents required for employer for giving exemption in case of preventive health check -up u/s 80D?

    Thanks & Regards

    1. I think you just need to show the reciept that you have spend that money

      1. Tarun Dua says:

        If an employee get reimburse this amount under section 10 . Is he also get exemption under section 80D for this amount? Please also guide which type of test (diseases) covered under Preventive Health Check up.


        1. Preventive check up is for basic health check up (preventive) . Which sec 10 are you talking about ?

  8. Manish says:

    Is the tax exemption of Rs 10,000 on saving accounts is applicable for ASSESMENT Year 2012-13 or for year 2013-14.

    1. It is for assessment year 2013-2014 . Not for this year ..

      1. Manish says:

        Thanks Manish…

  9. Rakesh says:


    Thanks for the compilations, it really helped. I was disappointed by the budget.
    Still not sure about this section –
    “Home Owners can claim upto Rs 5,000 for yearly maintenance”

    Could not get more information about it.

    1. Rakesh

      A home owner can claim up 3k as part of maintainance .. now its increased to 5k , are you a home owner ?

  10. Raj says:

    Hi Manish,

    What is the effect on Home loans in this budget ? Will the interest rates decrease ?

    Thanks in advance!!

    1. Raj

      NO change like that .. also note that the home loan interest rates are not decided in budget !

      1. Raj says:

        Thanks for the quick reply Manish!! What are your views on home loan interest rates based on the new budget? Like will they come down or goes up ?

        1. Budget does not decide that at all . its totally outside the budget !

  11. RRK says:

    It is disappointing to see after 134 comments none of the readers picked up the most important of all changes that is done in this “boring” budget.

    Check Manish summary point #7.

    All insurance companies are scrambling to control damage done. Almost 30-40% of the policies (in my estimate) are going to be thrown out in next 10 days.

    All single premium ulips, several regular ulip plans and several endowment plans, money back plans are scrapped in one sweep.

    Today ET published this story.

    Manshu (one mint) published his blog today, Deepak shenoy has already covered it with all seriousness. And no one here blinked yet !

    This is serious story, which deserve its own blog. Manish, Please take care of this subject.

    1. RRK

      From what understand is that this change will purely affect the policies issued only after Apr 2012 , Even in the article its not mentioned that existing policies will not get the tax break from next year if their premium is more than 10% of SA . Did you come across any source which says that ?

      1. RRK says:


        Yes. It will affect only plans that are issued after April 1, 2012.

        But most of the plans that exist today will be eliminated by this rule. When IRDA implemented few strict regulations to avoid misselling in Sep 2010, several plans were eliminated. But this time, even single premium and several endowment plans are affected. It is going to create a vacuum in April May. but looks like insurance agents have not realized the full impact yet.

        My point is – among all changes done in the budget this is the most serious one.

  12. ujjwal says:

    i have a question regarding taxation issues of tax free bonds ( say indian railways)
    i know if i sell before 1 year…STCG ( clubbed with other income)
    sell after 1 year..LTCG ( flat 10.36 % without indexation ).
    but my question is in the calculation of STCG & LTCG whether the tax-free interest paid should be included in the capital gain or only the gain due to difference in buy and sell price of the bond…please clerify..
    i bought tax free bond of 1 lakh on sept 2011…..got interest 80,000 on march 2012…..
    1) if i sell it on april 2012 for 1.1 lakh…what will be STCG ??…will it be on 10,000 or on 90,000 ( 10,000+80,000) ?
    2) i sell it on nov 2012 on 1.2 lakh…..what will be LTCG ??

    1. Ujjwal

      If you are selling it before the MATURITY PERIOD defined – the gains should be exactly same as you mentioned , before 1 yr would be short term and after 1 yr, LTCG

      1. ujjwal says:

        means 10,000 for STCG and 20,000 for LTCG ??…please confirm…

        1. STCG will depend on your tax bracket !

          1. ujjwal says:

            sir, do you not know the answer or not able to understand my question ?….you are great in giving useless answers …..

            1. Ujjwal

              Last comment I said that the STCG will depend on your tax slab , you cant throw number like that , if your bracked is 20% , then tax on STCG will be 20% , if your bracket is 30% , then it will be 30% ,for LTCG , it would be a fixed percentage and wont depend on the tax slab you are in .

              I think the best place to get a right answer would be forum : http://www.jagoinvestor.com/forum

    2. Paddu says:

      I am not qualified for giving tax advice so the following may be correct or incorrect.

      1) capital gains is “full consideration minus (cost of acquisition plus cost of improvement plus expenditure on transfer)” which is Rs. 1,10,000 minus (Rs. 1,00,000 plus zero plus brokerage plus service tax plus transaction charge plus stamp duty).
      2) capital gains is “full consideration minus (indexed cost of acquisition plus indexed cost of improvement plus expenditure on transfer)” which is Rs. 1,20,000 minus (Rs. 1,00,000 * cost inflation index for 2012-13 / cost inflation index for 2011-12 plus zero plus brokerage plus service tax plus transaction charge plus stamp duty).
      [Relevant section 48 of IT Act, 1961 as ammended up to March 2012 WebSitesDITTaxmannAct2010DirectTaxLawsITACTHTMLFiles2011&DFile=section48.htm]

      The interest received (or dividend received in case of equity shares or mutual fund units, or rent received in case of property) is immaterial.

      1) Tax of course depends on your bracket.
      2) Tax is at flat 20% (plus education cess & secondary & higher education cess) except that it is capped by 10% of the gains calculated w/o indexation assuming the bonds are listed in a recognised stock exchange.
      [Relevant section 48 of IT Act, 1961 as ammended up to March 2012 WebSitesDITTaxmannAct2010DirectTaxLawsITACTHTMLFiles2011&DFile=section112.htm]

  13. Ninan says:

    RM is kicked out for doing a good budget and looking ahead, FM will survive for doing a boring safe budget, and maybe a honest one. I think there is supposed to be one more pre-election budget. FM could have committed Hara kiri like Rail Min. But he didnt and knows what it takes to survive so many years in politics. He is better off as FM than as an MP like Trivedi is now. Looking at his partners some should be committed to an asylum. Opposition opposes everything, even what they agree on. UPA-1 was stymied by Left from WB, and now UPA 2 by Didi from WB. She will anyway leave WB worse off. So what can FM do, maybe he could have been adventurous. But would he have survived.

    1. Ninan

      Thanks for sharing your views on the topic 🙂

  14. Amit Khandelia says:


    Whether interest on Sweep in facility given by some banks come under exemption of 10K or it is separate as the same is in nature of savings account only. You can withdraw the money at any point of time.


    1. Amit

      I think the interest for the saving bank part will be coming under 10k exemption , but the part which is converted into FD, i dont think it will really come that limit

  15. Daven says:

    The rich get richer, The poor get poorer
    And the middle class are just stuck in a
    never ending pit hole

    1. Daven

      Hopefully next govt will make life easy ! 🙂

  16. jp says:

    How are RSUs (restricted stock units) & ESPP shares taxed?

    1. JP

      It will depend if they are of resident company or foreign company , I would say you start a thread on this topic on our forum to get better clarity : http://jagoinvestor.dev.diginnovators.site/forum

      1. JP says:

        Manish I was unable to post my query on the forum.

        1. What is the issue ? Is your login/password successfully created ? Send me a mail and i will create it !

  17. Alok says:

    That’s why our Investments shouldn’t take care of Inflation only but also the Congress factor.. The online calculators should include this 🙂

  18. bagyalakshmi says:

    OK Thanks Manish!

  19. Bagyalakshmi says:

    Hi Manish,

    Thank you very much for your article. It is simple, clear and easy to understand.

    If Life Insurance policies are increased only from April 2012, can I quickly buy one now itself? 😉


    1. Bagyalakshmi

      Hte premium difference will not be such a big difference. Dont worry too much on that

  20. Sreedhar says:

    Hello Manish,
    I have a clarification regarding Item 10 of your article. You had mentioned that 1% TDS is applicable if you sell your property. But i understand that 1% TDS is applicable if you buy a property.
    The Budget says the following
    “In order to collect tax at the earliest point of time and also to have a reporting mechanism of transactions in the real estate sector, it is proposed to insert a new provision to provide that every transferee, at the time of making payment or crediting any sum by way of consideration for transfer of immovable property (other than agricultural land), shall deduct tax, at the rate of 1% of such sum, if the consideration paid or payable for the transfer of such property exceeds –
    (a) fifty lakh rupees in case such property is situated in a specified urban agglomeration; or
    (b) twenty lakh rupees in case such property is situated in any other area. ”
    That means TDS has to be paid by the one who buy’s the property and not by the one who sells it. (Assuming that the meaning of transferee is ” a person to whom property is transferred” ).
    Please correct me if my understanding is wrong
    To say that this article is well written is like saying sachin has scored one more century 🙂

    1. No Sreedhar

      Here transferree is the person who transfers the asset and gets the payment, so its on selling . Dont put your head in this much , I am sure on this , you can see these others articles also whose title also says “Budget 2012-13 imposes 1% TDS on property sales” http://www.business-standard.com/india/news/budget-imposes-1-tdsproperty-sales/160755/on

  21. Kiran says:

    Hi Manish,

    I’m looking to take a life insurance for myself. From the budget, have the service tax increased for pure life insurances? If yes, is it from April 1’2012 ?

    Keep up the good work.


    1. Yes Kiran

      Its from next year , but its very very marginal !

      1. Kiran says:

        Thanks Manish.

  22. Suresh K Narula says:

    Hi Manish

    Excellent Stuff.. (Complete Coverage, crisp and clear)

    Thanks a lot

  23. Arudra Kumar says:


    Crisp and clear post on the imp points of the budget which are applicable for most of us.

    The budget has got nothing to offer to the salaried class and the common man. Waste of time to even talk about it.


    1. Arudra

      Calm down man 🙂 .. You have some pennies atleast 🙂

  24. Sahil Bhatia says:

    Hi Manish,

    Thanks again for such a short and crisp article covering all the major points for tax payers like us.
    I am deeply disappointed by this budget as the Service Tax, Excise Duty have been increased by a whooping 20% of their existing value and the EPF reduced to such an extent.
    This will surely impact a salaried class tax payer like us.
    Increasing the disappointment was the fact that there was ‘No major change in the Tax slabs’ (hope the DTC comes soon to the rescue).

    Anyways we all have seen the election results of the congress party in all the 5 states and seeing this budget, I bet the UPA govt pissed off a lot of Tax payers.

    Thanks again for the great article though !
    Keep Educating

    1. Sahil

      Yea .. lets make sure this govt is not back ! 🙂

      1. Sahil Bhatia says:

        I agree with you my brother 🙂

  25. C M Vyas says:

    Reference: “The scheme would allow for income tax deduction of 50 per cent to new retail investors, with annual income of below Rs 10 lakh, putting in up to Rs 50,000 directly in equities. The scheme will have a lock-in period of 3 years.”

    Manish has pointed out what, does it mean brand new investor? Perhaps not. If that is the case, then a person can invest only once in his lifetime! However, I hope “new” means IPO, then bad IPOs will get subscribed to. A danger.

    It could possibly mean a small investor who buys and forgets Rs 50000 worth of equity investment in a year. 50% of this amount will probably be reduced at the Gross level as exemption. Disclaimer: PROBABLY! If… if it is as I assume, then a person in the 20% tax bracket (<Rs 10,00,000) gets a tax break of Rs 5000. I would say it is substantial considering that persons with lesser gross incomes got much lesser tax breaks this time. Its also sensible in a way. Advisers will now tell customers to invest in good quality stocks at least for this portion of the investment as it cannot be sold for three years. This way more people get exposed to responsible investing in Stock Markets. They may invest more as a consequence.

    As Manish has said, we need to read the fine print.

    1. CM Vyas

      I read on livemint , that it might be only those who never had a demat account, but with that definition each perrson can invest only once in life time 🙂

      1. C M Vyas says:


        There is an article in TOI, Bangalore under the page “Swatantra”, a financial advice section. My assumption seems to be correct. Rs 50000 per year, Rs 5000 max benefit per year (the wordings sound like a tax saving budget recommendation all right). A once in your life measure like this cannot be a tax proposal, I believe! But the word “New” still beats me! I hope it is for ALL with an income of <10 lacs pa. Then this would also qualify as one more avenue to reduce taxes while definitely gaining through LTCG.

        1. CM Vyas

          I am confused on that myself . Let some time pass and we will get clarity

  26. Shashank says:

    Hi Manish,

    Is there any change in the home loan principal and interest amounts covered undered tax exemption? Have the amounts been revised from 1 lac for principal under 80c and 1.5 lacs for the interest amount?


    1. Shashank

      NO , there are no changes like that !

  27. Krish says:

    Very informative for the salaried class. The silverlining is the same old tax planning of last year would be applicable this year.

    I would like to know about the new tax on Gold. Could you please tell us on what is the likely impact post budget on buyers of Gold.

    1. Krish

      There is no change in gold taxation , its same as old year


  28. Jerry Jose says:

    Budget makes life more expensive. Tax exemption limit hiked to Rs. 2 Lakh and removed the 80ccf benefit to compensate it. interest from SB A/c exempted up to Rs. 10000. Bu who will get that much interest from SB A/c. EPF interest rate reduced to satisfy government employees who is getting less interest for their GPF and there is a demand to hike it. Service Tax hike will affect almost all services and the consumer should give more money for all services and commodities. Totally Budget makes life more expensive.

    1. Thanks for putting your views Jerry !

  29. madhu says:

    If I earn Rs. 1.95 lakhs from nifty intraday trading (the one and only source of income) during the year 2012-2013, will my tax liability be ZERO? i.e shall I get exemption upto Rs. 2 lakhs though it is income from short term gain which is taxable at the rate 20%?
    Please reply.

    1. Ram Aadepu says:

      You can deduct the below from touy short term capital gain taxable in your case is:

      Exemption limit – Taxable income from other sources – short term capital gain
      = 2L-0-1.95= 0.05 L

      So, you can deduct 5K from your total ST Capital gains and the rest is taxable. but to avail this, you should be resident individual or HUF within the meaning of IT Act. and your ST capital gain is taxable@ 10%+ applicable SC and EC and SHEC. (Sec 111A of Income Tax Act)

      1. madhu says:

        what is the tax amount to be paid in the instant case?

    2. Madhu

      I think you will not have to pay any tax , you are earning just 5,000 more than the limit , but if you claim the HRA or conveyance allowance , then your liability will be NIL


      1. madhu says:

        how is it more by 5000 than the limit?
        A bit detail, please

        1. Madhu

          Limit for female was 1.9 lacs last year and your income was 1.95 lacs , thats why .. this 2 lacs limit is for next year

  30. Anshuk Jain says:

    EPF has been reduced starting April 2011 itself..

    1. Anshuk

      No , why do you say that , for 2011-2012 , the rate was 9.5%

      1. Dheeraj says:

        reduced EPF rate is applicable for 2011-12…. bad thing is investor realizes that he will get less interest after investing for the whole year.

        1. Dheeraj

          Is it applicable from 2011-2012 ? LInks ?

          1. Dheeraj says:


            “Days before Union Budget 2012-13, Finance Minister Pranab Mukherjee took a bold decision to reduce the rate of interest on deposits in the Employees’ Provident Fund to 8.25 per cent for 2011-12. ”

            So the cut is applicable for 2011-12

  31. Sivanarayana.J says:

    Thanks Manish ….
    But i would like to know if 20k is still allowed under section 80CCF for the next final year also.

    1. Sivanarayana

      there is still confusion in that , you can be sure only after few days !

  32. ksundar says:

    Dear Manish,

    Thanks for an excellent & simple presentaion of Budget 2012!

    Hats Off!

    1. Thanks KSundar 🙂

  33. Satish Av says:

    Dear Manish,
    Nicely trimmed to breath more tight..
    Well cited by Rajesh. This country has nothing for tax-payers, but everything for looters..
    ->In England and some European countries, the most needed healthcare is given by govt freely by tax-payers money…

    If someone wowing (with that political nostalgia) on this tax bracket, here is the insight..

    “While the direct tax reform proposals in the Budget will result in a revenue loss of Rs 4,500 crore, indirect tax proposals would result in a revenue gain of Rs 45,940 crore. Service tax proposals alone are expected to yield an additional revenue of Rs 18,660 crore.”

    1. Satish

      Thanks for putting your views 🙂

  34. K.M.Manohar Kumar says:

    Important points in the budget that affect individuals have been compiled and presented in a very easy to understand fashion. Thank you.

  35. Arunkumar says:

    Thanks a lot Manish..

  36. rkrao says:

    The FM could have calculated the revenue loss from increase in exemption limit to three lakhs and compensated by retaining the tax limits for upper brackets;by not acceding to popular sentiment he and his party lost support of a lot of tax payers.
    A point you missed is the exemption from submission of returns by those whose taxable income is less than 500,000 and interest less than 10,000 ;that will free a number of taxpayers from physical and mental drudgery.have i read it right !

    1. RkRao

      That exemption from filing the tax was even last year , but there are so many conditions that it will help help eventually ! .

  37. Manjunath G M says:

    Dear Manish,

    Per item 13, we can claim tax exemption for Home maintaninance. Pls. can you give me a info under which section i can claim? Do i need to submit any proof or how can i claim?

    13. Home Owners can claim upto Rs 5,000 for yearly maintainance

    If you own a house, you can show Rs 5,000 a year as maintenance amount and claim tax exemption on that. Earlier it was Rs 3,000 and now increased to Rs 5,000.


    1. Manjunath

      I am not sure of the section

  38. Rahul says:

    Thanks for such valuable inputs on personal taxation.

    Can you also give a brief on corporate taxation. Since I have formed a company last month only. So I want to know what is there in for us. ALSO is there any clause of 10% deduction from salaries of directors…………?


    1. Rahul

      I am not very clear on corporate taxation . The rates are unchanged , that I know , but this salaries for directors you can see yourself in this document : http://indiabudget.nic.in/ub2012-13/mem/mem1.pdf

  39. Vishal Mishra says:

    Thanks for giving this information Manish.

    1. Welcome Vishal 🙂

  40. ujjwal says:

    i read todays times of india and tax dedudtion on infrastructure bond of 20,000 have been removed….is it right ??

    1. No Ujjwal

      There is nothing like that, its still 20k per year, Just that its not raised. Looks like you misenterpreted some line.

      1. Ramprakash says:

        No Manish. As per the details available so far, 20K investment in infrastructure bonds under sec 80CCF has been REMOVED.
        The increase from 30000 crore to 60000 crore is the amount institutions can raise through tax free bonds (like NHAI IRFC PFC HUDCO bonds that came out this year.)

        1. Ramprakash

          I just saw this .. Yes i agree , it has been removed . Will update the article now

        2. Yes Ramprakash

          I relooked at it and seems like its removed .

  41. Neel says:

    Hi Manish

    Just forgot to mention that the exemption is regardng Long term capital gains for investment in SME.


  42. Neel says:

    Hi Manish

    I have been following your post for last few weeks and found it very interesting, precise and informative besides being educational.

    Regarding Budget 2012, there is one new Exemption introduced..I am copying the link below:


    Can you throw some light on it.


    1. Neel

      That exemption you are talking about is for capital gains tax arising out of selling real estate . You might know that if you use the proceeds in buying any other residential house in next 2 yrs , you dont pay tax, Now thats extended if you invest that money in some SME who used your money in buying the machinery .

      Is that clear ?


  43. Dr MOHSIN says:

    Is there any thing about NPS contributions over and above 80C one lac limit in this budget

    1. Yes , you can claim upto 10% of your basic salary if you are investing in NPS : http://www.fundsindia.com/content/jsp/NPS/NPSUSRRegistrtion.do?method=register

  44. Sudheer M. says:


    One cannot ignore the 10,000 SB account exemption. Rather than having the benefit of IT, I would consider it in the exemption of filing the Income Tax. I have mentioned as comments in one of your posts of Exemption of filing the income tax if your income is less than 5 Lakhs. Normally, the SB interest is given in the month of March for majority of the banks and it need to be declared in Form-16 to get the benefit of exemption from filing returns. The employers normally close taking the proofs or declarations by first week of March and therefore 99% of the people will not be able to utilise the facility of not filing the returns even though their income is less than 5 lakhs.

    Here I trust, that will be overcome and people will be able to take advantage of this exemption.

    1. Sudheer

      But in this case , you can be worry less if you know that the interest part from your saving bank will be less than 10,000 ? Earliar you had to make sure you count it for paying the tax , right ?

  45. Phani says:

    I think the information on subramoney about Rajiv Gandhi Equity Scheme needs correction. But on a different note, sick and tired of the Gandhi’s and Nehru schemes/airports/roads/stadiums.

    1. Phani

      What correction does it need ?

      1. Phani says:

        Manish, not the information you wrote; The one on the subramoney link needs correction. Instead of 50K deduction, it talks about exemption on capital gains tax.

  46. varghese says:

    Dear Manish,

    I read from some analysis that tax exemption for infra bonds is withdrawn( not available) for next year.
    Please confirm

    1. No , nothing like that

  47. Phani says:

    Hi Manish,
    As usual nice and helpful post. Not considering ‘what’s the profit in it for me’ question, the one thing i liked in this budget is the removal of tax on interest on savings account for less than 10K. As you said i think more than 90% of tax paying public either don’t know or don’t pay tax on interest. Legislation should be realistic and focus on making compliance easy. In this direction, the FM should have removed the necessity to show medical bills for 15K medical exemption and also food-coupons. Waste of resources and more middle-men. Should have removed these two item-specific-exemptions and just increased the exempted salary by 25K more. Already DTC is so watered-down and not sure of it in next year also.


  48. Welcome Mahavir 🙂 . I hope it was crisp and helpful 🙂

  49. Naresh says:


    Can you please inform me the relevant section under which the following deduction is allowed. My office accountant checked and says that this is not applicable and has requested for the relevant section….

    Home Owners can claim upto Rs 5,000 for yearly maintainance
    If you own a house, you can show Rs 5,000 a year as maintenance amount and claim tax exemption on that. Earlier it was Rs 3,000 and now increased to Rs 5,000.

    1. Naresh

      Its the same housing charges which we pay monthly . So you must be having some society documentation on that. that should be like a proof

      1. Naresh says:

        Society maintenance charge bill is available, issue is that my employer (accountant at office) is not accepting this as he is not aware of the rule.

        Shall be grateful if you can inform me the Section / Rule no under which this deduction is applicable, so that I can convince my employer.

        Thanks for your support and co-operation.

        1. Ram Aadepu says:

          Hi Naresh,
          we have the below to claim deductions u/s 23 and 24 of Income Tax Act
          Sec 23 –> Muncipal taxes paid is to be deducted when arriving annual value of the house

          Sec24 –> a. 30% of annual value b. Interest on housing loan

          I think maintenance charges are not allowed under “Income from house property” unless the property is used for business or profession. Since you are in employment, I dont think you can avail this.

  50. seenu says:

    please clarify two doubts:

    50% deduction for investments in equity upto 50000 does it hold good only for R gandhi scheme or our daily routine mutual funds

    “additional deduction for infra bonds of 20000 removed” as per TOI

    1. Seenu

      As of now Rajiv Gandhi scheme says direct stocks only , but in some days it will get more clear if normal mutual funds will also come into that or not .

      regarding the TOI point , I have not seen any thing like that , can you put the link to the article where you read it or Put a full para .

  51. Shaggy says:

    hi manish,

    i don’t have any questions to you coz we cant alter the budget, all that we can do is
    re-calibrate our investments and E&E (Earnings & Expenses)

    thought i am a reading your write-up’s since long today i must thank you for all your
    heart and mercy towards simplifying the complex stuff’s in financial world.

    god bless.

    shaggy boo

    1. Thanks Shaggy boo ! 🙂

  52. Sid says:

    Nice article again.

    Hence proved.. Common man is the real sufferer. One question, for house maintenance exemption what kind of proof one needs to submit?


  53. Jason Braganza says:

    And this is why I love you! Thank you for making sense of the mess!

  54. ram says:

    Worst budget ever…No thoughts about the people of india and its future while making this budget…
    No idea in which direction India is going with Congress…

    1. Ram

      Thanks for putting your views .. which party do you want to see as next ?

  55. Thanks for wonderful analysis and insightful information.

    Kudos… 🙂

  56. Santosh Navlani says:

    Nice, precise post Manish. Can’t get simpler than this 🙂

    You may want to correct the typo though – the STT was 0.125% & is reduced to 0.1% for delivery transactions. You just multiplied it by 10.

    Personally, i wasn’t expecting the 3 lakh limit to go thru. But the 80C limits not being hiked has been a dampener. The life insurance premium rule isn’t going to impact much. Many of the LIC’s endowment policies already are in it. However, ULIPs which anyways aren’t getting bought will see some impact. The Rajiv Gandhi Scheme is going to be a non-event. i personally don’t see any Indian Retial investor in India – for whom this scheme is intended – buying & holding a stock for 3 years! And its not going to be of any use to stock brokers as well – so expect nobody calling & pitching this scheme.

    It would have been good if this scheme was applicable to MF ELSS. Sad, it isn’t. Its an irony that Equity-oriented tax-saving schemes like ELSS have just 3-year lockin & PPF – the debt-oriented ones have 15 years. This was recently pointed by Dhirendra Kumar as well in 1 of this posts….the long-term oriented products having least lockin & short ones having longer – it happens only in India :).

    Anyways, there is nothing much that middle-class salaried individual has in this budget. The 20k extra exemption is more of inflation-adjustment, but the 2% extra tax on almost everything is going to take away atleast 50% out of it, if not more.

    Santosh Navlani | moneysights.com | making investing simple

    1. jitendra solanki says:


      Pranabda is interested in DTC which he is implementing in phases. Tax rates are implemented now. I personally feel he has left most of the savings element for DTC which he has indicated to be impemented at earliest.

    2. Santosh

      changes that STT typo 🙂 . The thing is standing commission had given their suggestions to DTC guys that better raise the exemption and 80C limits to 3 lacs each so that even if a person earns upto 6 lacs ,he does not have to pay any tax. As per inflation conditions , I think its very much needed .

      Not sure how much this 50,000 limit for direct saving will impact, but there are still many people who are in urban india and have not yet invested in stocks , may be they will be moved with this rule ?

    3. Muthu Krishnan V says:

      nice comments.

      manish: is there any way to enable like button for comments just like facebook so that the most liked comments move to the top? I would press like for this comment.

      1. Muthu

        Nothing like htat as of now 🙂

  57. Sougato Pal says:

    A very precise and good review. It’s far better than what TV channels showing for Last 24 hrs. It contains all what I need to know and nothing extra.

    The budget has actually nothing for me as a salaried person. Also Now I have to pay more service tax. The Rajiv Gandhi ELSS(why they name every thing with a Gandhi) may not be applicable for me as I am already invested in equity markets.

    The 5000 preventive medical check up may not such a great thing to be used since my medical premium(including the 12% service tax) will be more than the Rs 15000. They should have made this apart from mediclaim premium

    BTW Manish Could you explain What this GST is all about and what are its pros and cons?

    1. Thanks Sautago

      No much idea about GST , may be ask it on our forum : jagoinvestor.com/forum

  58. Nilufer says:

    There are many mutual fund investors who dont need to have a demat account.. Will they too be called new investors, incase this criteria is applicable to mutual fund investors?

    1. Nilufer

      Incase you dont have demat accounts , you will be new investor , but lets wait for more details on this

  59. devaraj says:

    This is a bakwas budget, no use for common man or any person.

    1. Devaraj

      Thanks for your views ..

  60. Reju says:


    Any change in Infra Bond limit (80CCF) ? There was a mention on increase in total allocation to 60k Crore. Any impact of this on the individual exemption limit?

    1. No Reju

      The change is only on the Infra bonds limit on issue , last year it was said that only worth Rs 30,000 crore bond would be issued, this year its doubled to 60,000 crore, but the tax exemption limit for that is just 20,000 like last year


      1. Reju says:

        Thanks for the Info

      2. Phani says:

        Hi Manish,
        I think the 80CCF infra bond tax exemption is gone as there’s no mention of continuing it. It was for 1 year initially and then extended for this FY too. No mention of extending it for next FY.


      3. jitendra solanki says:


        As far as i know the increase is only for tax free bonds and not for Infra Bonds under 80CCF. No mention of these bonds indicates that it might be phased out from April. Dissapointment for so many investors.

      4. girish asrani says:

        Hi Manish,
        will the tax benefit on investments on Infrastructure Bonds continue.
        Since no specific announcement was made to extend it for FY 13.


        1. No Girish

          Seems like that are removed now , but confusion is still there 🙂

      5. Saket says:

        I didn’t get it. Will the Rs 20,000 exemption be available for this year too? As per my understanding the infra exemption was only for the last 2 yrs 2010-11 and 11-12.
        And does the Rs 60,000 crore figure pertains to Infra-bonds? or for those other type of bonds where interest is tax free and not the amount invested?

        1. Saket

          This is a grey area right now, tax exemption on infra bonds was allowed for only 2010-2011 and then extended one more year, but this year there is no mention about it so I am assuming that its not there now, so now this year there might not be that exemption .

          The limit raised on issue of infra bonds is increased, so companies can raise more bonds this year.


          1. pramod says:

            Dear Manish:
            you are right. exemption of Rs 20000 us 80CCF no longer remains an instrument for the next FY. However, the infra bonds mentioned by Pranab babu are the Infra bonds, where the interest earned from these bonds remains tax free.

            1. Pramod

              Are you sure ? I dotn think so , even the infra bonds which were have tax exemption do not have a tax free maturity . Can you check that back .

            2. Shashidhar says:

              Yes, that was correct!
              You can buy as many infra bonds as you can, no cap on that. But, a big BUT, you will not get tax-exemption on this purchase.
              However, the interest recieved on infra bonds are tax-free. Which is still attractive (not for the small investors though)!


            3. Yes .. i confirmed this yesterday . You are right

      6. Siddhant says:

        There seems to be some confusion. The increased limit is FOR TAX FREE BONDS to be issued by the companies & 80 CCF is not at all related. 80CCF is now history…..

        1. Yes .. now its confirmed that Infra bonds will not get the tax benefit !

          1. ganesh says:

            how budget popular

  61. Rajesh says:

    There is nothing more for middle class family. 2 % more service tax is more burden.

    I pay my tax as I want to take home loan and nothing else. Why should I pay taxes when these corrupt politician & other non-tax payers taking the same benefit what I am getting (in real I am getting nothing from govt). I have to pay for my son (from nursery to college), medical insurance & other insurance, monthly expenses etc. When I apply for personal loan, bank charges 15-17 % , if I go for buying a car, company give me loan @ 5 % . This happen only in India.

    For my survival after 60 years, I will get nothing from govt, but beggars will take everything what I pay as tax. India is only for beggars, non-tax payers & industrialist. Economy is growing for them only and never for tax-payers.

    As an Honest person, I will start non-billing payment and taking more money from clients from April’12. Why should I have to suffer ????

    Mera Bharat Mahan !!!!

    Rajesh Patel

    1. Rajesh

      thanks for venting your anger and putting your views .. I agree that things have to be more better for tax payers in our country and only then things will get better.


      1. Muthu Krishnan V says:

        running the country is like running an apartment complex at a much larger scale and needs maintenance money. one of the components of this maintenance money is income tax and service tax. I am all for increase in service tax and reduction in personal income tax as this would affect many of the people involved in cash only deals and do not pay any IT or only token IT like many of the business/trader classes.

        India is not an oil-rich country that can export to the gas guzzling countries like US and use this income to run their country.
        yes, there is corruption and that has to be tackled. noises are being raised in the right direction by the likes of annaji and co and hopefully some of the existing younger generation get the message and grow up to be honest.

        not paying taxes is also corruption by itself.

  62. Gaurav says:

    Thanks Manish,
    Now I realize how Maggi has been helping me keep fit over the past few years. 😛

    But jokes apart, yours was an assessment of the Union Budget that I was truly looking forward to, and I checked on in here an number of times since yesterday. You have really given a perfect precis of the budget from the POV of a common man. Really disappointing budget indeed.

    The 20k hike in limit will easily be gobbled up by the increase in DA. All said and done, the ELSS continuing is the only positive thing that I can see for I do not have much of a hope from the sarkari ELSS that they talked about. I would not be surprised if it has just been introduced in a hurry and is not well thought over- hence the lack of clarity. Anyway, that will be cleared in good time.

    Keep up the good work.

    1. Gaurav

      Thanks for appreciating and putting your views !

  63. Venki says:

    About new ELSS plan, does the limit of 10 lac taxable income or gross income? Details are not clear.

    1. Venki

      Call it Rajiv Gandhi Equity Scheme , its not new ELSS ! . Also the income considered would be mostly taxable income, as I understand it . It would be only for NEW investors, who do not have a demat account till now , but this is not confirmed yet


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