Budget 2019: Five ways this Budget can benefit taxpayers

Updated: February 1, 2019 7:47:53 AM

India Union Budget 2019: In the Interim Budget 2019, there are speculations that the government will use the opportunity to appease the salaried taxpayers ahead of the general election.

Budget 2019-20Budget 2019: Five ways this Budget can benefit taxpayers

By Aditya Bagree

Union Budget 2019: With the Budget 2019 around the corner, taxpayers are hoping for announcements that will reduce their tax burden. The last few budgets have not been too friendly with taxpayers, especially with the last year’s announcement of 10% long-term capital gain tax. In the Interim Budget 2019, there are speculations that the government will use the opportunity to appease the salaried taxpayers ahead of the general election. The expectations are really high this time. These are the 5 major ways in which the Interim Budget can bring joy for the Indian taxpayers:

1. Increase in basic exemption limit from Rs 2.5 lakh to Rs 5 lakh: Individuals having a total income up to Rs 5 lakh are required to pay tax @ 5%. With the increase in total income earned by the individuals, the rate of taxation jumps up directly to 20% (for income up to Rs 10 lakh) and 30% (for income beyond Rs 10 lakh). There arises a disparity in taxation for individuals falling in the middle-level income category. It is hoped that the income slab will be increased; else the tax rates are reduced. The basic exemption should be increased from Rs 2.5 lakh to Rs 5 lakh and the highest income tax slab should be revised from Rs 10 lakh to Rs 20 lakh. Else, the government should consider streamlining the tax rate to 10% for income up to Rs 10 lakh and 20% for income beyond Rs 10 lakh.

2. Increase tax exemption under Section 80C: Many individual taxpayers face a challenge in claiming a deduction on their investments as the limit of Rs 1.5 lakh provided under Section 80C gets quickly exhausted. There is a need to revise the threshold specified under Section 80C. Further, conservative investors tend to buy five-year FDs for tax saving where interest rate has come down drastically. Hence, for a better return for investors, investment in the low-risk hybrid funds should be eligible for 80C deduction.

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3. Less taxing bank FDs: If the government eases up the taxation on risk-free liquid investments, there are chances that will add a new feather in the hat for the government. The amendments of Section 80D exempting non-senior citizens as well from the tax levied on bank FDs or further extending the limit of interest income to Rs 1 lakh will encourage the taxpayers to maintain a balanced risk profile.

4. Increase in exemption limit for interest on home loans: Under the existing tax provisions, interest of up to Rs 2 lakh on a housing loan for a self-occupied house is deductible from an individual’s gross income. Also, the limit of loss from house property that can be adjusted against other income is just Rs 2 lakh. Considering the high real estate prices, these limits can be enhanced to Rs 2.5 lakh.

5. Standard Deduction: This is the high time when the government must strike a balance by changing the tax slabs to favor public and maintain a fiscal sense as well. Salaried employees didn’t find any relief in the last year’s budget, but this year hopes are high for an increase in the standard deduction. This will help the salaried class to cope up with the inflation.

Considering the steep rise in the cost of living due to inflation, it is suggested that the basic exemption limit and income slabs should be enhanced to give benefit to the low-income group.

The author is Director, Business Aggregate (Network of Independent Companies)

Do you know What is Finance Bill, Short Term Capital Gains Tax, Fiscal Policy in India, Section 80C of Income Tax Act 1961, Expenditure Budget? FE Knowledge Desk explains each of these and more in detail at Financial Express Explained. Also get Live BSE/NSE Stock Prices, latest NAV of Mutual Funds, Best equity funds, Top Gainers, Top Losers on Financial Express. Don’t forget to try our free Income Tax Calculator tool.

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