Perhaps for the first time in the history of India a very big tax exemption hike has been witnessed by the individual income taxpayers as per the new amendments introduced by the Finance Bill 2008.

For individual taxpayers the basic income tax exemption limit has been hiked to Rs. 1,50,000. This means every individual taxpayer when he derives income from all sources taken together during the financial year 2008-2009 then the said individual would not be required to make payment of income tax even of one single rupee. Likewise the basic exemption limit for women income taxpayers would be Rs. 1,80,000 while the basic exemption limit for senior citizens (65 years) has also been increased to Rs. 2,25,000. Due to increase in these new limits it is really a matter of joy for all categories of taxpayers to rejoice.

In monetary terms, the increase in the exemption limit would translate into income tax saving ranging from Rs. 4,120 upto Rs. 45,320 for individual taxpayers having income of Rs. 5 lakhs. Likewise for women taxpayers the net saving as a result in hike in the basic exemption would be minimum of Rs. 6,695 and maximum of Rs 44,805 on income of Rs. 5 lakh. Finally, for senior citizens the tax saving would be minimum of Rs 6,180 and maximum of Rs. 39,655 if the income is Rs. 5 lakh. The above saving is inclusive of the saving on education cess.

Another special enhanced deduction to be enjoyed by individuals is for those individuals who make payment of medical insurance premium for his/her parent or parents whereby they would enjoy additional deduction to the tune of Rs 15,000. If parents are senior citizen then the deduction would be Rs. 20,000. This is additional deduction, which would be made available over and above the existing deduction to the taxpayer upto Rs. 15,000 for medical insurance policy for self, spouse and children.

The new budget proposals have not amended the existing tax provisions relating to surcharge and education cesses. The tax on short term capital gains of listed securities would now be 15 per cent as against the present system of taxing them at 10 per cent. There is however, no change in tax treatment of long-term capital gain on listed securities, which would continue to be exempted as in the past.

The clarification on reverse mortgage would surely help the senior citizens and would help them to take liberal advantage of reverse mortgage because no income tax liability is attached on transactions involving reverse mortgage. Reverse mortgage is not treated as a transfer so no capital gains tax, likewise no income-tax is payable on the amount received consequent to reverse mortgage as it would not be income of the assessee.

Expenses on festival occasions would mean lower payment of Fringe Benefit Tax (FBT) while the expenses incurred on guest house would be outside the scope of FBT. This provision would make salaried employees happy.

Now Permanent Account Number (PAN) would be required to be quoted in most financial transactions. Details are expected in due course. If you do not have your PAN card it is the time now to apply so that no future problem to you.

Just like Securities Transaction Tax a new tax is introduced known as Commodities Transaction Tax (CTT) to be levied in respect to taxable commodities transactions in a recognised association.