ONE can't help but get the feeling that the tinkering exercise that Budget 2009 eventually turned into is a precursor to the new tax code.   

Budget 2009 has indeed been strange. It was widely expected that the first budget in the new term of a resurgent United Progressive Alliance (UPA) unhindered by coalition forces would bring in big bang market friendly measures. There would be major policy announcements on pressing issues such as disinvestment, fuel policy, foreign direct invetment (FDI), the worrying level of fiscal deficit etc. However, none of this happened.

Actually, the first impression that one got, immediately after the budget speech was that it was rather a non-event. However, the fine print contains a number of amendments to the law that the budget speech chose not to mention. While a detailed analysis follows, it must be said that a number of these changes are at the micro level-- fine tuning and fixing loose ends rather than any 'big picture' measures.

New direct tax code

Significantly, the Finance Minister in his budget speech announced that a new direct tax code will replace the current Income Tax Act and the same is going to be introduced within 45 days. One can't help but get the feeling that the tinkering exercise that Budget 2009 eventually turned into is a precursor to the new tax code.

Major highlights of Budget 2009
1. Income tax slabs increased marginally: The basic exemption limit has been increased by Rs 10,000 for men and women and by Rs 15,000 for senior citizens. This would translate into a tax benefit for Rs 1,000 for non-senior citizens and Rs 1,500 for senior citizens respectively.

2. Surcharge on income tax abolished: Simultaneously, the 10 per cent surcharge has been discontinued for all categories of taxpayers except for corporates. Since for individuals, surcharge was only applicable to income above Rs 10 lakh, this move will essentially benefit only the higher income group. In other words, the highest tax rate has come down from 33.99 per cent to 30.9 per cent. The 3 per cent education cess stays put for all taxpayers.

Income level applicable for FY 08-09

Next page:  More key highlights of the budget

Illustration: Vaibhav Shirke

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e-mail: Sandeep Shanbhag

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