Budget Book: 10 important terms and their meanings you must know ahead of FM Nirmala Sitharaman's announcements
taxpayers around the country are eagerly awaiting Feb 1 when Finance Minister Nirmala Sitharaman will present the last (interim) Budget before the 2024 general elections. Taxpayers’ expectations include slashing of tax rate, rollout of tax exemptions and slashing of TDS (tax deducted on source) on virtual digital assets (VDA), among others. Before listing out more expectations, it is vital to first decode some key terms for the lay taxpayer to understand.
1. Tax deduction: As the term suggests, it refers to the amount to be deducted from taxable income to lower the amount of tax that you owe. For instance, taxpayers are entitled to claim a standard deduction of ₹50,000.
This means total income is reduced by ₹50,000 to arrive at taxable income. Likewise, when you invest in PPF, NSC, tax-saving FD, you can claim tax deduction (under section 80C) up to a maximum of ₹1,50,000. 2. Rebate: Rebate is a reduction in the total income tax.
Just as deduction allows reduction in the taxable income, rebate enables tax payers to reduce their tax component by the amount of rebate. It is generally given to stimulate economic activity by lowering the tax burden of tax payers. 3. Surcharge on tax: Surcharge is applicable on those persons whose income is more than ₹50 lakh.
It applies to the tax payable and not the total income. A surcharge of 10 percent is levied on tax rate of 30 percent, thus raising the total tax liability to 33 percent. ALSO READ: Budget 2024: A guide to understanding the complex terms 4. Cess on tax: This is a levy and a form of tax imposed on income tax to raise funds for specific purposes such as health and education.
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