While raising the income tax exemption limit to Rs 1.5 lakh from 1.1 lakh, Finance Minister P Chidamabaram also provided for lower tax rates for income up to Rs 5 lakh.

Earlier, the minimum exemption limit stood at Rs 1.1 lakh for all classes of individuals. For women, the exemption limit has been raised to 1.8 lakh from 1.45 lakh previously, while for senior citizens it has been hiked from Rs 1.95 lakh to Rs 2.25 lakh.

For an income of Rs 10 lakh a year, an individual would have to pay a tax of Rs 2,05,000, as against Rs 2,49,000 under the previous tax structure. For women assessees, a similar income would attract a tax of Rs 2,02,000 under the new regime, down from Rs 2,45,500 previously, while the tax for senior citizens would drop to Rs 1,97,500 from Rs 2,36,000 earlier.

The minimum benefit to a person with an annual income of Rs 1.5 lakh at the threshold will be around Rs 4,000, Finance Minister P Chidambaram said, while presenting the Budget 2008-09 in Lok Sabha.

According to the proposals, income between Rs 1.5-3 lakh will be taxed at 10 per cent, between Rs 3-5 lakh at 20 per cent, while for Rs 5-10 lakh it would be 30 per cent.

Based on this structure, an individual having an income of Rs 10 lakh would pay no tax on income up to Rs 1.5 lakh, Rs 15,000 between Rs 1.5 lakh to Rs 3 lakh, Rs 40,000 between Rs 3-5 lakh and Rs 1,50,000 between Rs 5-10 lakh. Previously, the tax amounts for these four slabs were Rs 4,000, Rs 35,000, Rs 60,000 and Rs 1,50,000 respectively.

The tax benefit when compared to the previous regime would be higher for male assessees, as compared to women and senior citizens.

While men with an annual income of Rs 10 lakh stand to gain Rs 44,000, the same for women and senior citizens with similar income is Rs 43,500 and Rs 38,500 respectively.

In case of women assessees with annual income of Rs 10 lakh, the tax amounts for income slab of up to Rs 1.8 lakh would be nil, Rs 12,000 between Rs 1.8-3.0 lakh, Rs 40,000 for Rs 3-5 lakh and Rs 1,50,000 for Rs 5-10 lakh. Earlier, the tax rates for these slabs stood at Rs 6,500, Rs 29,000, Rs 60,000 and Rs 1,50,000 respectively.

For senior citizes with similar annual income, the tax for income up to Rs 2.25 lakh would be nil (Rs 6,000 previously), Rs 7,500 (down from Rs 20,000) for Rs 2.25-3.00 lakh, Rs 40,000 (down from Rs 60,000) for income between Rs 3-5 lakh and Rs 1,50,000 for income between Rs 5-10 lakh (unchanged).

However, those with income in excess of Rs 10 lakh would continue to attract an additional surchange of 10 per cent.

Chidambaram also introduced an additional deduction of Rs 15,000 for taxpayers towards payment of medical insurance for parents. This would be in addition to the Rs 1 lakh limit for savings under Section 80C of the Income Tax Act.

Mobiles to cost more, cars to cost less

The results of the budget speech are slowly coming to fore with mobile and car companies deciding on thier future moves. Mobile phone users would now have to shell out more money for buying new handsets, with the government proposing to levy one per cent excise duty on them.

In his Budget speech, Finance Minister P Chidambaram said: "Excise duty of one per cent, called National Calamity Contingent Duty, is now imposed on polyester filament yarn, which is the only yarn suffering this excise duty. I propose to remove that duty and shift the levy to cellular mobile phones."

"It will definitely increase the prices of mobile phones," LG Business Group Head (GSM) Anil Arora said when asked about the impact of the proposed move.

The proposal may translate into a corresponding one per cent hike in price of mobile handsets. However, a full impact of this needs to be reviewed, a Nokia spokesperson said.

Echoing similar sentiments, Indian Cellular Association President Pankaj Mohindroo said the proposed move of levying one per cent excise duty would increase the prices of mobile phone sets.

When asked how much the prices would go up, he said, "The price rise will not be killing... it will be minimal."

Global cellular handsets majors Nokia, Samsung, Motorola and LG have their mobile manufacturing plants in India.

On the other hand, much to the delight of prospective small car buyers, leading manufacturers Hyundai Motor India and General Motors on Friday said they would slash prices by up to Rs 16,000 to pass on benefits from the excise duty cut announced in the budget.

Finance Minister P Chidambaram, in his budget speech, has proposed to cut excise duty from 16 per cent to 12 per cent on small cars.

"We have decided to pass on the benefit of the excise duty cut to customers on three models – Santro, i10 and the Getz--effective April 1," a Hyundai official said.

The price cut on Santro could be between Rs 12,000 and Rs 14,000, while that on Getz would be between Rs 14,000 and Rs 16,000.

Price cut on the newly launched i10 could be between Rs 12,000 and Rs 16,000, the official added.

General Motors is also cutting he price of its small cars Spark and Aveo U-VA.

"We will be cutting the prices of our small cars between Rs 7,500 and Rs 14,000," GM India Vice-President P Balendran said.