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February 27, 2001                                       Feedback  

    - EXIM POLICY '00



    - BUDGET 00-01
    - BUDGET 99-00
    - BUDGET 98-99
    - BUDGET 97-98


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Personal Finance

Changes in Nutshell

Surcharge on income tax

17%*, if taxable income exceeds Rs 1, 50,000
(In other cases 15%)


All surcharge stands withdrawn except the surcharge for Gujarat earthquake

Interest on Capital borrowed for acquiring/ constructing one self-occupied house property

Rs 1,00,000

Rs 1,50,000

The acquisition or the construction of the house property should be completed before April 1, 2003.

Deduction under Section 80L

Rs 12,000

Rs 9,000

Increase in effective tax rate paid by investor

Exemption from deduction of tax at source on interest other than interest on securities

Rs 10,000

Rs 2,500

The provisions are effective from June 1, 2001 and could lead to increase in small deposits with Banks and housing finance companies.

*Inclusive of levy of 2%-surcharge for Gujarat earthquake

Budget Implications

The Union Budget 2001-2002 has effectively lowered the tax burden of assessees by removing the entire surcharge, except, however for the surcharge of Gujarat earthquake. No changes are made to the rates of income tax. An attempt has also been made to increase the taxpayers base by extending the one by six tax criteria to all urban areas as per census of 1990-1991. No changes are suggested in respect of rates of capital gains tax. Deduction available under Section 80L is now reduced to Rs 9,000, resulting in increase of the tax burden. At the same time, long-term capital gains tax liability can be mitigated by making investments in eligible public issues of Indian companies.

The impact of the budget on personal finances can be broadly summarized as under:

Investments Related:

  • Income distribution by corporates (dividends) and by non-equity-oriented funds of Unit Trust of India/Mutual Funds on or after June, 2001 will be subject to a reduced distribution tax of 10.2% as against 22.6% earlier.
  • Long-term capital gains on listed securities or units of Mutual Fund/Unit Trust of India shall be exempt from tax if such capital gains are invested in equity shares forming part of an eligible issue of capital made by a public company as a part of public offering (Section 54ED). The exemption will be withdrawn if such investments are sold within a period of 12 months.
  • Capital gains tax exemption under Section 54EC is now also available by making investments in bonds issued by the Rural Electrification Corporation Limited.

Salary Taxation:

  • Rebate on LIC premia, contribution to PF, etc under Section 88 is increased from Rs 20,000 to Rs 30,000 in case of assessees who have salary income upto Rs 1,00,000.
  • Commission and brokerage are now subjected to deduction of tax at source @10% of such commission or brokerage, in case, the income exceeds Rs 2,500 p.a.
  • Exemption of amounts upto Rs 5,00,000 received under VRS extended to Central and State Government employees.
  • Any amount received by a person, prior to his joining any employment or upon leaving any employment, is now taxable as salaries. This will impact joining bonuses and golden handshake payments.
  • Income arising out of stock options to employees (clarified as taxable only on sale in the last budget) will be exempt only when the Scheme of ESOP/ESPS is in accordance with the regulations framed by SEBI. Accordingly, non-SEBI schemes will be impacted.

House Property:
Deductions under income calculated from House Property would now be restricted to the following:
1) 30% of the annual value; and
2) Interest payable on borrowed capital.
All other deductions hitherto available are withdrawn.

Information Courtesy: RSM & Company

Rediff-CRISIL Budget Impact Analysis
Budget 2001

Disclaimer: CRISIL has taken due care and caution in compiling this report. Information has been obtained by CRISIL from sources which it considers reliable. However, CRISIL does not guarantee the accuracy, adequacy or completeness of any information and is not responsible for any errors or omissions or for the results obtained from the use of such information. CRISIL is also not responsible for any errors in transmission and especially states that it has no financial liability whatsoever to the subscribers/ users/ transmitters/ distributors of its web site.

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