Union Budget 2019 India: Finance Minister Nirmala Sitharaman is all set to present her maiden budget on July 5 and with this, there are expectations galore that post their massive victory in the recent polls, the Modi government will try its best do something for the common man in this budget. It may be noted that in the Interim Budget 2019, presented in February this year, the government had announced some sops for the salaried class and small taxpayers, like extending relief under Section 87A, increasing the limit of standard deduction for the salaried taxpayers from Rs 40,000 to Rs 50,000, hiking the threshold limit for deduction of tax from rent, among others.
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However, that being an interim budget, there wasn’t much scope for the government too to do much for the different sections of people and taxpayers. Thankfully, that is not the case now. No need to say that keeping this in view, people’s expectations have also grown manifold. While some believe that not much will be done this time also, others are of the opinion that the common man and the salaried class’ expectations may be met to a large extent in this budget. Whatever be the case, here are some of the expectations of the common man from the Union Budget 2019:
1. Changes in the income tax slab
The first change which many people are expecting may be in the income tax slab rates. The tax exemption limits are supposed to increase. Here’s what the predictions say:
Category of tax payers | Current limits | Predicted limits |
Individuals below 60 years of age | INR 2.5 lakhs | INR 3 lakhs |
Individuals aged 60 years or more but less than 80 years | INR 3 lakhs | INR 3.5 lakhs |
Individuals aged 80 years and above | INR 5 lakhs | INR 5.5 lakhs |
These increased limits would give some relief to the middle-class tax-payers. Moreover, the tax rates are also predicted to change. After the first 5% tax slab rate, the other two rates are likely to decrease by 5%. So, “individuals with incomes between Rs 5 lakh and Rs 10 lakh might have to pay taxes @15% and those above Rs 10 lakh would have the tax rate at 25%. Many also believe that the Finance Minister might increase the limit of Rs 10 lakh to Rs 20 lakh keeping in mind inflation and the economic growth of the country. Thus, where individuals earning Rs 5 lakh to Rs 10 lakh were charged tax @ 20%, the prediction imposes 15% tax on individuals earning Rs 5 lakh to Rs 20 lakh,” says CA Abhishek Soni, Founder, tax2win.in.
However, the rebate, which was increased in the Interim Budget 2019, is expected to remain the same wherein individuals having a taxable income of up to Rs 5 lakh would get a full tax rebate.
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2. Changes in Section 80C deductions
Section 80C allows various types of income tax deductions through investments and tax deductible expenses. For the last many years people have expected the Finance Ministry to make changes in this section, but nothing has happened. Now with the new Finance Minister in place, people are expecting the following changes in this popular section.
# The overall deduction limit of Rs 1.5 lakh would be increased to Rs 2 lakh
# The additional deduction for investment under the National Pension System (NPS) is also predicted to increase. Currently, under Section 80CCD (1B), NPS investments up to Rs 50,000 are allowed as an additional deduction over and above the Section 80C and Section 80CCD (1) deductions. This limit is expected to increase to Rs 75,000 to promote NPS investments by the public.
3. Revamping of Section 80D
After Section 80C, another popular tax deduction section is Section 80D which allows tax deductions on the premiums paid for health insurance plans and on preventive health check-ups. In the Interim Budget, the maximum deduction available to senior citizens was increased from Rs 30,000 to Rs 50,000 while for individuals aged below 60 years, the limit of Rs 25,000 remained the same. In this budget, it is expected that the limit of Rs 25,000 would be increased to Rs 30,000.
Moreover, the section also allows deductions of up to Rs 5000 spent on preventive health check-ups. This limit is also expected to increase to Rs 10,000 given the high costs of medicine in recent times.
4. Changes in other deduction limits under Chapter VI
Chapter VI of the Income Tax Act contains tax-free deductions including Section 80C etc. So, after the major changes predicted under Section 80C, other sections are also predicted to become more tax-friendly. Some of the changes which have been predicted include the following:
# “Section 80TTB deduction is expected to be made open for all. This section currently allows deduction on the interest income earned by senior citizens on their fixed deposits, savings account, post office deposits, etc. Deduction up to Rs 50,000 is allowed under the section. However, in the latest budget, the deduction under Section 80TTB is expected to be offered to all,” says Soni.
# Similarly, deduction under Section 80DDB is also expected to be made uniform for all ages. Currently, the deduction is up to Rs 40,000 and in case of senior citizens and super senior citizens, deduction is allowed up to Rs 1,00,000. This limit of Rs 1 lakh might be made applicable for tax-payers of all ages.
# Rent paid by individuals who don’t have HRA component in their salaries is allowed as a deduction up to Rs 5000 per month under Section 80GG. This limit is also expected to increase to Rs 10,000/month.
# Section 80E offers tax deduction on the interest paid on education loans. “This tax deduction is offered for up to 8 years. However, with the new budget around the corner, the duration for claiming tax deduction on education loan interest is expected to be increased to up to 15 years,” informs Soni.
5. Benefits on home loans
The principal repaid on a home loan is allowed as a tax deduction under Section 80C. With Section 80C limits expected to rise, home loan borrowers can claim a higher deduction on the home loan principle repayments. Moreover, the limit of tax deduction applicable on home loan interest paid under Section 24 is also expected to increase. Currently, the limit is up to Rs 2 lakh, which might be increased to Rs 2.5 lakh or Rs 3 lakh as per the expectations of the common man and small taxpayers.
6. Changes in HRA calculation
A salaried employee can claim House Rent Allowance as a tax-free allowance from the employer. Individuals in metro cities can claim 50% of their salary as HRA and individuals in non-metro cities can claim 40%.
“This limit of 40% might be removed and every employee might be allowed to claim a deduction of 50% of the salary as HRA to lower the tax liability. Moreover, the HRA amount is calculated @10% of the basic salary, including Dearness Allowance. This limit is also predicted to be lowered to 5% of the basic salary, including Dearness Allowance. Both these changes would reduce the tax liability of the salaried employee,” says Soni.
These are some of the major expectations on the tax front from the Union Budget 2019. While there are expectations galore from the new Finance Minister, let us see which of these wishes actually get fulfilled and benefit the common man.
