For the first time in independent India, finance minister Piyush Goyal annoucned major income tax sops, benefiting salaried and middle-class people. The soaps include a rise in the exemption limit threshold for middle class tax payers – from the current Rs 2.5 lakh to Rs 5 lakh.
“Individual taxpayers having taxable annual income up to Rs 5 lakh will get full tax rebate and therefore will not be required to pay any income tax,” Goyal said. This means that anyone with net taxable income up to Rs 5 lakh will not be required to pay any taxes. However, anyone with net taxable income above Rs 5 lakh will not be able to avail this tax benefit and only get standard deduction benefit.
If an individual invests in the specified tax saving schemes of the government, the effective tax-free income limit will be Rs 6.5 lakh a year, while it may go further up with additional avenues like NPS, medical insurance and home loan interest payment.
Explaining the rebate in a press conference after presenting the Budget, Finance Minsiter Goel said, “Tax slabs are not raised. It is only a rebate that will benefit people having taxable income up to Rs 5 lakh.”
New Income Tax Slabs — Tax Rate
Income up to Rs 5,00,000* — No tax
Income from Rs 5,00,000 – 10,00,000 – 20% (remains unchanged)
Income more than Rs 10,00,000 – 30% (remains unchanged)
The proposal will benefit 3 crore middle-class tax payers, said Piyush Goyal in his 1 hour 50 minutes-long budget speech.
Goyal further announced an increase in standard tax deduction for salaried employees from the current Rs 40,000 to Rs 50,000.
Also, the TDS threshold on interest on bank and post office deposits has been raised from 10,000 to 40,000 rupees. The TDS threshold on rental income has been raised from 1.8 lakh to 2.4 lakh rupees.
he government also extended benefits under Sec 80(i)BA for one more year, for all housing projects approved till end of 2019-2020.
Goyal also proposed that benefit of rollover of capital tax gains be increased from investment in one residential house to that in two residential houses, for a taxpayer having capital gains of up to Rs 2 crore. However, it can be exercised once in a lifetime, he added.