Budget 2019: How much has been delivered to the middle class? Find out

Budget 2019 will save you at least some tax besides there are no proposals to increase the tax burden for anyone. So that is good news. After extending gratitude to all taxpayers for their “valuable contribution to nation building  and providing a better life to the poor and marginalized.” Goyal proposed that it is only natural that the benefits of these reforms be passed on to the middle-class taxpayers, hence the tax burden on this group be reduced. He emphasised the importance of fast-tracking these tax proposals since small taxpayers like the middle class, salaried individuals, pensioners, and senior citizens need clarity about their taxes at the beginning of the year. In effect justifying these tax proposals which are being placed as part of the interim budget.

It is in lieu of this sentiment that Mr Piyush Goyal proposed the following:

a. Individual taxpayers with taxable annual income up to 5 lakhs can avail full tax rebate under Section 87A. Which implies that even people earning gross income of 6.5 lakhs would not need to pay taxes if they invest in tax saving options under 80C, etc. The maximum tax rebate has been increased to Rs. 12,500. However, the minimum exemption limit stays at Rs 2.5L, and those with total taxable income in excess of Rs 5L will continue with the same limit and same rates of tax.

b. Standard Deduction for those who have income under the head salary, introduced only last year, has been raised to Rs 50,000 from the previous Rs 40,000.

c. Goyal proposed that those who were paying tax on notional rent on second self-occupied house property, no longer have to do so, starting FY 2019-20. The taxpayers can now claim two house properties as self-occupied and not pay any tax if these are not actually rented.

d. The TDS threshold on interest earned on bank/post office deposits has been raised from Rs 10, 000 to Rs 40,000. This change is announced focussing on small depositors and non-working spouses, who do not pay usually have taxable income. However, such interest income continues to be taxable as before.

e. The tax deduction limit on rent under section 194I has also been increased to Rs 2,40,000 from the previous Rs 1,80,000.

Any taxpayer, other than an individual or HUF, who is responsible for paying rent is liable to deduct tax at source under Section 194I. The tax will only be deducted if the rent payable exceeds Rs. 1,80,000 in a particular FY, which has now been increased to Rs. 2,40,000 from FY 2019-20 onwards.

f. The taxpayers with long term capital gains of up to Rs. 2 crores can now claim a deduction of the amount invested in two residential houses under Section 54 and save their income taxes. The benefit can be availed by the taxpayer once in their lifetime. This is a choice given to taxpayers.

Finance Minister Piyush Goyal’s speech was delivered with the aim to please the middle-class taxpayers. A calculated move, to not tweak the tax slab but increase the tax rebate. This helps keep the number of tax filers and at the same time reduces tax incidence on those who actually need it.

(By Archit Gupta, Founder & CEO ClearTax)