Good news taxpayers! As widely expected, Finance Minister Piyush Goyal gave the middle class taxpayers some big-bang income tax relief, while presenting the Budget 2019 in Parliament today. As per the budget proposals, annual income up to Rs 5 lakh is proposed to be made tax-free.
This means individual taxpayers with annual income up to Rs 5 lakh will now get full tax rebate. The current limit is Rs 2.5 lakh. Thus, individuals with gross income up to Rs 6.5 lakh will not need to pay any tax if they also avail the full benefit of Rs 1.5 lakh Section 80C deduction.
However, whether this move will benefit only the taxpayers in the lower income slab or all the taxpayers? Tax experts clarified that all the taxpayers will not get benefited out of this.
“This is not an across the board benefit. The benefit is available only where the taxable income is up to Rs 5 lakh,” said Saraswathi Kasturirangan, Partner, Deloitte India.
Ashish Kapur, CEO, Invest Shoppe India Ltd, said, “Raising of the income tax exemption limit from Rs 2.5 lakh to Rs 5 lakh per annum is indeed a pathbreaking step. It will provide a very significant relief to the middle class. This will also boost economic growth by giving a very meaningful stimulus to consumption.”
Earlier, there were expectations galore that in an election year, some income tax relief must be given to the middle class, common man and salaried people by the Modi government.
One such expectation was that there will be some changes in the income tax slab rates or there may be some increase in the income tax exemption threshold. For instance, from Rs 2.5 lakh to Rs 3 lakh or Rs 3.5 lakh. Industry body CII had even recommended to get the exemption limit increased to Rs 5 lakh from Rs 2.5 lakh currently. Tax experts also wanted the FM to increase the Section 80C deduction limit from Rs 1.5 lakh to at least Rs 2.5 lakh to boost the household savings rate.
It may be noted that at present, three rates have been specified by the Finance Ministry for the purpose of levy of tax. For instance, if your income is up to Rs 2.5 lakh, then no tax is required to be paid. If your income falls in the slab of Rs 2.5 lakh to Rs 5 lakh, then the tax rate is 5%. However, if your income is above Rs 5 lakh but limited to Rs 10 lakh, then the tax rate is 20%. Further, if your income is above Rs 10 lakh, then the tax rate is 30%.