The Hindu : Feb 02, 2019, 10:28 AM
The interim Budget contains several proposals aimed at reducing the tax burden on the salaried class and home owners, increasing the tax rebate limit and amount for small taxpayers and exempting certain forms of rental income from tax. Benefit extends to ₹6.5 lakh if Section 80C investments are made full use of; 3 crore assesses expected to benefit.Finance Minister Piyush Goyal proposed amending Section 87A of the Income Tax Act to increase the rebate for taxpayers at the lower end of the spectrum.Currently, the Section provides for a rebate of ₹2,500 for all taxpayers with an income of less than ₹3.5 lakh a year. So, a taxpayer earning ₹5 lakh a year effectively paid tax (at 5%) on only ₹2 lakh of that amount.High compliance“Because of major tax reforms undertaken by us during the last four-and-half years, both tax collections as well as the tax base have shown significant increase, achieving a moderate taxation-high compliance regime,” Mr. Goyal said. “It is, therefore, just and fair that some benefits from the tax reforms must also be passed on to the middle class taxpayers.”In this Budget, Mr. Goyal proposed raising the rebate amount to ₹12,500 and increasing the limit to ₹5 lakh a year.This means that those earning up to ₹5 lakh a year will be exempt from tax. However, those earning more than ₹5 lakh will not be eligible for this and will have to pay tax according to the normal rates. For example, somebody earning ₹8 lakh a year will have to pay ₹72,500 of tax (₹2.5 lakh taxed at 5% plus ₹3 lakh taxed at 20%).This does not take into account the exemption of ₹1.5 lakh available to taxpayers under Section 80C of the Income Tax Act.“This will provide tax benefit of ₹18,500 crore to an estimated three crore middle class taxpayers comprising self-employed, small business, small traders, salary earners, pensioners and senior citizens,” Mr. Goyal said.The Budget also proposed increasing the standard deduction limit from the ₹40,000 announced last year to ₹50,000.In a move designed to provide tax relief to those who prefer to save rather than invest, the Budget also contained a provision to increase the Tax Deduction at Source (TDS) threshold on interest earned on bank or post office deposits to ₹40,000 from the current ₹10,000.