Finance Minister Piyush Goyal kept the country guessing on income tax rates in the first half of his Interim Budget speech. When the announcements finally came, the salaried and the middle class breathed a sigh of relief.
"Reducing the tax burden on middle class has always been our priority ever since our Government took over in 2014," the Finance Minister stated before announcing reductions in the income-tax rate. Here's how you stand to make more in FY2019-20 if you're in the right tax bracket.
- Individual taxpayers earning up to Rs 5 lakh per annum get a full tax rebate.
- Individuals earning up to Rs 6.5 lakh per annum also may not have to make any tax payments if they invest in tax-saving instruments. If you add all the available exemptions, individuals with an annual income even higher that Rs 6.5 lakh may not have to pay taxes. This figure may go further up if a taxpayer uses avenues like the National Pension Scheme, medical insurance and interest payments on home loans.
As the Minister explained,
“Additional deductions such as interest on home loan up to Rs 2 lakh, interest on education loans, National Pension Scheme contributions, medical insurance, medical expenditure on senior citizens etc, persons having even higher income will not have to pay any tax.”
This move is expected to provide income-tax benefits of Rs 18,500 crore to an estimated 3 crore middle-class tax payers, including salaried individuals, small business owners, traders and senior citizens.
Tax deducted at source (TDS) and other changes
- TDS exemption on interest earned from deposits held in banks and post offices has been raised to Rs 40,000 from the current Rs 10,000. This comes as a huge relief to taxpayers who invest a large portion of their savings in bank fixed deposits and various post office deposit schemes.
- The Interim Budget also raised the standard deduction Rs 50,000 from Rs 40,000 for salaried people. Over 3 crore salary earners and pensioners sand to benefit from this change.
- For making more homes available under affordable housing, the benefits under Section 80-IBA of the Income Tax Act is being extended for one more year, i.e. to the housing projects approved till 31st March 2020.
- In a move that benefits landlords who have rented out their properties to non-individuals, the TDS threshold on rental income from non-individuals was also raised to Rs 2.4 lakh from the current Rs 1.8 lakh per annum.
Further, the Minister proposed an income-tax exemption on notional rent for a second self-occupied house. Currently, income tax on notional rent is payable if one has more than one self-occupied house. This will benefit families who have two self-occupied homes on account of their job, children’s education, care of parents, etc.
In addition, capital gains of up to Rs 2 crore made from the sale of immovable property can now be invested in two residential houses as against the current practice of exempting such income from tax if it is invested in one house within a year.
Piyush Goyal justified including tax proposals in an Interim Budget: "Though as per convention, the main tax proposals will be presented in regular budget, small taxpayers especially middle class, salary earners, pensioners and senior citizens need certainty in their minds at the beginning of the year about their taxes."
The minister concluded his speech by saying,
“This is not merely an Interim Budget, but a medium of the country's development journey. All the transformation that we are witnessing, is because of the passion of the people of our nation. The credit goes to them only. Development has become a mass-movement during the period of our Government.”
Tarush is driven towards delivering unbiased and accurate reportage while engaging with as many mediums as possible to narrate a fresh perspective. Working for the past few years in the digital space with YourStory, he has covered the Indian technology ecosystem extensively, focusing on new age Fintech companies, while building strong connects within the industry.