New Delhi: In a bonanza for the country's middle class in an election year, the government on Friday proposed various tax sops including tax exemption for individual annual incomes of Rs 5 lakh, all of which add up to taking individual incomes up to Rs 9.5 lakhs outside the tax net.
Presenting the Interim Budget 2019-20, acting Finance Minister Piyush Goyal proposed doubling the tax exemption threshold for individual annual incomes from the current Rs 2.5 lakh to Rs 5 lakh. Individuals with yearly income within the proposed limit will not have to pay any income tax for the next fiscal.
He also proposed increasing the standard deduction limit by Rs 10,000, and raising the tax deducted at source (TDS) threshold on interest earned on bank and post office deposits which would benefit small depositors.
Besides proposing that standard deduction will be increased to Rs.50,000 from the current Rs.40,000 to benefit the salaried class, Goyal said individuals with annual incomes of Rs.6.5 lakh and who have invested in various tax savings schemes will not have to pay income tax.
According to the Minister, with additional deductions such as interest on home loans, national pension scheme contribution, medical expenditure on senior citizens, individuals with even higher income will not have to pay tax.
"This will provide tax benefit of 18,500 crore to over 3 crore middle class tax payers comprising self-employed, pensioners and senior citizens," he said.
The ceiling on payment of gratuity has been enhanced from Rs 10 lakh to Rs 20 lakh.
The increase in standard deduction for the salaried segment will provide an additional tax benefit of Rs 4,700 crore fo over three crore salary earners and pensioners, Goyal said.
Moving to other sops, he said the benefit of rollover of capital gains under the Income Tax Act will be increased from investment in one residential house to two residential houses for a tax payer having capital gains up to Rs 2 crore. This benefit can be availed once in a life time.
Noting that income tax on notional rent is currently payable if one has more than one self-occupied house, Goyal said that to give a boost to the real estate sector, he is proposing to exempt levy of tax on notional rent on a second self-occupied house.
He also proposed to raise the TDS threshold on interest earned on bank and post office deposits from Rs 10,000 to Rs 40,000.
"This will benefit small depositors and non-working spouses. Further, the TDS threshold for deduction of tax on rent is proposed to be increased from Rs 1,80,000 to Rs 2,40,000 for providing relief to small taxpayers," Goyal said.
Commenting on the Interim Budget, Deloitte India Partner Tapati Ghose said in a statement. "The tax breaks for the salaried, middle class, pensioners is being welcomed and is far more than expectations. This is definitely a budget for the middle class."
"Without losing much of the tax revenue, the government has managed to please a huge chunk of taxpayers" Nangia Advisors Managing Partner Rakesh Nangia said.