Post-Budget, your buying power won't go up

NEW DELHI: First, the good news. For most of us, the revised tax slabs means a drop in the amount we have to pay to the taxman. But before you get too buoyant, consider this: What you save in terms of income tax, is actually likely to slip out of your pocket on other counts like increased prices and cuts in perks you may be getting from your employer at present.
"While you may not have to pay tax on fringe benefits, your employer will.This may actually discourage many employers from offering these benefits. It is incorrect to assume that relief and rebates have been doled out across the board in Budget 2005. Although there has been an attempt to simplify the taxation process, reliefs and rebates have all simply been juggled around," said a tax expert.
Everything from scholarship for employee''s children, to food and beverages served to staffers outside office or factory premises and guest house facility will now be taxable. If the income tax exemption slab has been raised to Rs 1 lakh, standard deduction has been withdrawn. While this does not make too much of a difference, you end up paying from the other pocket on account of service tax.
"So while you may not be paying a lot of income tax on the face of it, your buying power may not remain the same. The cost of commodities and services are all likely to rise," said All India Tax Advocates Forum secretary M K Gandhi. "If the price of petrol is going up, and more services brought under the service tax net, prices of commodities will automatically rise," he added.
Chartered accountant Dhirendra Bhatia feels one areas where tax payers will feel the pinch is in making investments: "One of the crucial changes is the one being made under Section 80 C that apparently exempts investments up to Rs 1 lakh from tax. But this is merely deferring the taxation as the year in which you redeem the invested amount, you will have to pay tax on not only the principle, but also the interest accrued."