Finance Minister Piyush Goyal on Friday announced full rebate on income tax for those with a taxable income of up to Rs 5 lakh a year. He made the announcement while presenting the interim Budget 2019 of his government in Parliament.
Goyal also proposed a higher standard deduction for salaried individuals – Rs 50,000 instead of the current Rs 40,000.
Income tax slabs do not usually see major changes in an election year. Goyal, however, said “small taxpayers need certainty in their minds at the beginning of the year about their taxes”, and proposals for them “should not wait”.
Here is the part of Goyal’s speech in which he made proposals about the tax structure:
- On behalf of all the people of India and our government, I would first like to thank all our taxpayers for their valuable contribution to nation building and for providing a better life to the poor and marginalised sections of society. Your tax helps provide dignity to our sisters and mothers with toilets and cooking gas connections. Your tax pays for the electricity connections to the poor who lived in darkness for generations. The tax you pay will provide health care to 50 crore brothers and sisters, and children. It is you who is ensuring respect, dignity, and a secure future to our retired jawans through One Rank One Pension. Thank you, taxpayers.
- 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 and we have made progress towards achieving a moderate taxation, high compliance regime. It is, therefore, just and fair that some benefits from the tax reforms must also be passed on to the middle class taxpayers. Keeping this in view, I propose to further reduce the tax burden on such taxpayers. Though as per convention, the main tax proposals will be presented in the 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. Therefore, proposals, particularly relating to such class of persons should not wait. Hence, while for the present the existing rates of income tax will continue for FY 2019-’20, I propose the following:
- 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. As a result, even persons having gross income up to Rs 6.50 lakh may not be required to pay any income tax if they make investments in provident funds, specified savings, insurance etc. 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 etc, persons having even higher income will not have to pay any tax. This will provide tax benefit of Rs 18,500 crore to an estimated 3 crore middle class taxpayers comprising self employed, small business, small traders, salary earners, pensioners and senior citizens.
- For salaried persons, Standard Deduction is being raised from the current Rs 40,000 to Rs 50,000. This will provide additional tax benefit of Rs 4,700 crore to more than 3 crore salary earners and pensioners.
- Currently, income tax on notional rent is payable if one has more than one self-occupied house. 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. I am proposing to exempt levy of income tax on notional rent on a second self-occupied house.
- TDS [Tax deducted at source] threshold on interest earned on bank/post office deposits is being raised from Rs 10,000 to Rs 40,000. This will benefit small depositors and nonworking 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.
- The benefit of rollover of capital gains under Section 54 of 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.
- 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, I have 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.