5% surcharge on income tax abolished
Union finance minister Jaswant Singh has retained the income tax exemption limit at the present level of Rs.50,000, but the 5 per cent surcharge on personal income tax has been abolished.

Not everybody gains. A 10 per cent surcharge will be levied on incomes over Rs.8.5 lakh per annum. Additional deduction for dividend earnings has been raised from Rs.9,000 to Rs.12,000. The total deduction under section 80-l of the Income tax Act will be Rs.15,000, including Rs.3,000 for investment in government securities.

Standard deduction up, dividend income freed
The budget proposes no change in the income and corporate tax rates and raised standard deduction while retaining the deductions available on home loans.

The income from dividends paid by mutual funds and companies has been exempted from tax to boost investment in equities have been removed, Mr Singh said.

The finance minister also said investors who buy stocks from 1 April 2003 will be exempt from paying tax on gains they make on their investments if they hold them for more than a year. Investors now pay 10 per cent long-term capital gains tax on gains they make after one year on their stock investments.

The government has replaced the dividend tax with a distribution tax of 12.5 per cent imposed on companies and mutual funds giving dividends. The equity plans of mutual funds will be exempted from distribution tax for one year, Mr Singh said. The government-controlled UTI-I fund will be completely exempt from the tax.

Tax rebates for senior citizens increased
The budget proposes to raise the tax rebate for senior citizens to Rs 20,000. As a result, their income up to Rs 1.53 lakh will now become exempt from income tax. In the case of senior citizens on pension the effective exemption limit will become Rs 1.83 lakh because of the standard deduction of Rs 30,000. They could get further relief by taking advantage of the tax rebate available under Section 88. In order to reduce bureaucratic hassles, the budget proposes to accept self-declaration filed by senior citizens in regard to no deduction of tax at source.