The Interim Budget 2019, presented by Finance Minister Piyush Goyal on 1st February 2019, has put forth the achievements of the Modi government over the last 4 years.
The Interim Budget 2019, presented by Finance Minister Piyush Goyal on 1st February 2019, has put forth the achievements of the Modi government over the last 4 years. Economic reforms, increase in foreign direct investment, ease of doing business in India, digitization of the economy are the major achievements of the government.
The Budget 2019 has again proved the government’s dedication in bringing the best for the farmers and the youth of the country. The government has launched several schemes for the benefit of the middle class and salaried employees. Reducing the tax burden for the middle class has always been the priority of this government.
Demonetization has ensured a higher tax payer base and there has been significant collection in taxes. Common man and middle class interface with the Income Tax Department has become much simpler and easier. The government has extended its gratitude to all the honest tax payers as this has contributed to serve the poor and create the better infrastructure.
The personal tax benefits provided to individuals over a period of last 4 years included increase in basic exemption limit from Rs 200,000 to Rs 250,000, reduction in tax rate from 10% to 5% for the slab rate between Rs 250,000 and Rs 500,000, tax rebate was introduced resulting in no taxes for income up to Rs 300,000, deduction claims were raised from Rs 150,000 to Rs 200,000 and a standard deduction up to Rs 40,000. These benefits have significantly helped the middle class employees bringing a decent tax savings over a period of time.
The government through the Interim Budget 2019 has made some tax proposals, though the main tax proposals will be presented in the regular budget later during the year. The tax proposals provide benefit to individual taxpayers, a full tax rebate for taxable income up to Rs 500,000, i.e. no taxes if the total taxable income is less than Rs 500,000.
So, let’s take an example of an individual earning income of Rs 850,000 (after standard deduction); claiming loss from house property of Rs 200,000 and 80C deduction of Rs 150,000 would now not be required to pay any taxes while he was paying taxes of Rs 12,500 till last year.
While this budget has ended up with a “NO change” in the tax rates of the individuals, the tax rebate on income up to Rs 500,000 would provide tax benefit to a huge number of middle class taxpayers comprising self-employed, small business, small traders, salary earners, pensioners and senior citizens. Standard deduction of Rs 40,000, which was reintroduced in the last budget, has been increased to Rs 50,000 again adding small savings to the tax payers.
Apart from tax rebates and standard deduction, one of the tax proposals include providing exemption to second self-occupied property. Earlier, if a person owned more than one residential property, only one of those could be considered to be self-occupied. The others should either be let out or, even if they are not actually rented out, they will be deemed to be properties that have been let out. Accordingly, a notional income was taxed in the hands of the taxpayer. The proposal to exempt the second property seems thoughtful as a person is not burdened to pay tax on notional income.
To conclude, the tax proposals may not show “high Josh” to the upper middle class, but will cater to the large masses of the country, helping them with an increased disposable income.
(By Akhil Chandna, Director, Grant Thornton India LLP, with inputs from CA Ridhi Sanghvi)