Interim Budget - No tax upto Rs 5 lakh vide Sec 87A benefits
By TIOL News Service
NEW DELHI, FEB 01, 2019: THE Union Minister for Finance, Mr Piyush Goyal, today came up with a 'Chahal-like' googly for the Opposition in the House when he announced that there woud be no tax liability upto Rs 5 lakh annual income. Without enhancing the tax exemption threshold he referred to TAX REBATE. This apparently triggered confusion in the mind of tax experts as well as vociferous politicians in the House. Going by the Finance Bill it appears that his budget team has intelligently drafted the provision to achieve the political goal without losing much revenue. In other words, by amending Sec 87A, the tax rebate of Rs 2500 has ben enhanced to Rs 12500 which is the full tax liability for any income earner in Rs 2.5 lakh to Rs 5 lakh bracket. Without tampering with the tax rate or the tax slab Mr Goyal achieved to impress the Middle Class which accounts for a significant chunk of electorate.
In other words, this Rebate benefit will not be available to any taxpayer if the income is more than Rs 5 lakh. This way Mr Goyal has not lost much revenue.
As a result, Mr Goyal added that even persons having gross income up to Rs 6.50 lakhs may not be required to pay any income tax if they make investments in provident funds, specified savings & insurance. In fact, with 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 & persons having even higher income would not have to pay any tax. This would provide tax benefit of Rs 18,500 crore to an estimated three crore middle class taxpayers comprising self employed, small business, small traders, salary earners, pensioners and senior citizens.
STANDARD DEDUCTIONS RAISED
For salaried persons, Standard Deduction is being raised from the current Rs 40,000 to Rs 50,000. This would provide additional tax benefit of Rs 4,700 crore to more than 3 crore salary earners and pensioners, he stated.
TDS THRESHHOLD INCREASED
Tax Deduction at Source (TDS) threshold on interest earned on bank/post office deposits has been proposed to be raised from Rs 10,000 to Rs 40,000. Mr Goyal said that this would benefit small depositors and non-working spouses. Further, the TDS threshold for deduction of tax on rent has also been proposed to be increased from Rs 1,80,000 to Rs 2,40,000 for providing relief to small taxpayers.
MORE RELIEF TO RESIDENTIAL HOUSES
It has been proposed to exempt the levy of income tax on notional rent on a second self-occupied house. Currently, income tax on notional rent is payable if one has more than one self-occupied house. Mr Goyal announced the relief considering the difficulty of the middle class having to maintain families at two locations on account of their job, children's education, care of parents etc.
Further, the Finance Minister proposed to increase the benefit of rollover of capital gains under Section 54 of the Income Tax Act from investment in one residential house to two residential houses for a taxpayer having capital gains up to Rs 2 crore. This benefit can be availed once in a life time. 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 March 31, 2020. Also, for giving impetus to the real estate sector, the Finance Minister proposed to extend the period of exemption from levy of tax on notional rent, on unsold inventories, from one year to two years, from the end of the year in which the project is completed.
