Thursday, March 03, 2005
Budget Analysis - II - Chidambaram Ditches Students...
Was going through the fineprints of Budget today - but suddenly mention of Section 80E (which deals in deduction on education loans) caught my attention.... in the Finance Bill only those sections are mentioned in which there is any proposed change, but then didn't Chisambaram mentioned in his speech that the deduction on education loan has not been touched....
The earlier version of the deduction allowed to deduct the repayment of principal along with the interest paid thereon from the taxable income of the assessee (of course the pricipal & interest of Education Loan only). This deduction was Rs. 40,000 per year for 7 consecutive years. But now the deduction has been limited to interest component only & the word pricipal has been omitted from the section.
I studied the impact of this change, taking some hypothetical figues - Loan of Rs. 4,00,000 & interest @10%p.a. (reducing balance). So for 7 years repayment, the EMI comes to approx. Rs. 6,640. Using this the deduction earlier would have been Rs. 2,80,000 (spread across seven years) , but now the deduction will be limited to Rs. 1,57,800 only!!!!! This will lead to an additional (marginal) tax burden of approx Rs. 5,300 per year (avegare - @30% - with no surcharge)
What the hell is this supposed to mean??? Mr. Chidambaram very categorically specified in his speech that deduction on education loan stays as is it (though i expected him to raise the amount).... but then when you read the fineprints, you find such gross stupidity & back stabbing from the ministry!!! This clearly potrays the lack of transparency showed by the FM during his speech....
So Mr. Chidambaram - what do we do with our education loans, the effect of which we calculated assuming that the deduction will stay & thus taking loan is more beneficial than shelling out money from other resources???
prateek2410 | 01:28 pm
March 4, 2005 11:01 AM PST
Could you please tell us where this fine print exactly is? Were you reading the finance bill? Can you provide a link to it?
Let's Make Money
About me ... in bullet points (as we say in MDI)
Name - Prateek Agarwal
Qualification - MBA (Finance), C.A., B.Com.(Hons)
Work-ex - 17 months
Location - Lucknow/ New Delhi
Hobbies - Poetry writing, swimming
Date of Birth - 24th October