Budget 2020 Backgrounder: Since 2014, many decisions have been taken on income tax exemption limit, tax rate, tax rebate, tax-saving investments/expenses, etc.
Since the formation of Narendra Modi-led NDA government in 2014, many decisions have been taken on income tax exemption limit, tax rate, tax rebate, tax-saving investments/expenses, etc. While people in highest income range face higher surcharge as well as tougher decisions on capital gain taxes, people in lower income groups get relief.
Giving a big relief to people in low income group, then finance minister Arun Jaitley, in his first Budget in 2014, increased the tax exemption limit from Rs 2 lakh to Rs 2.5 lakh for people below 60 years of age and for senior citizens, the limit was increased to Rs 3, while for people above 80 years of age, it was kept unchanged at Rs 5 lakh. He also increased the maximum deduction limit u/s 80C from Rs 1 lakh to Rs 1.5 lakh.
However, tax rates were left unchanged at 10 per cent, 20 per cent and 30 per cent and 80D limits at Rs 15,000 on health insurance premium paid for self and family by individuals below 60 years of age and up to Rs 20,000 for senior citizens. The rate of Education Cess was also kept unchanged at 3 per cent, as well as maximum tax rebate Rs 2,000 on taxable income up to Rs 5 lakh and surcharge at 10 per cent on income over Rs 1 crore were also left alone.
In his next Budget in 2015, Jaitley increased the maximum limit u/s 80D from Rs 15,000 to Rs 25,000 for people under 60 years of age and from Rs 20,000 to Rs 30,000 for senior citizens. To make National Pension System popular, he also introduced additional deductions up to Rs 50,000 u/s 80CCD(1B) on voluntary contributions to Tier-1 Account of NPS in a financial year, which would be over and above the 80C limit. The rate of surcharge on income exceeding Rs 1 crore was increased from 10 per cent to 12 per cent, but wealth tax was abolished.
In his third Budget in 2016, Jaitley increased the maximum tax rebate from Rs 2,000 to Rs 5,000 for people having taxable income of up to Rs 5 lakh, while he increase the rate of surcharge also from 12 per cent to 15 per cent on income exceeding Rs 1 crore.
In Budget 2017, Jaitley lowered the minimum income tax rate from 10 per cent to 5 per cent, but the tax rebate was also lowered from Rs 5,000 to Rs 2,500 for taxpayers having taxable income up to Rs 3.5 lakh in a financial year. He introduced 10 per cent surcharge on income between Rs 50 lakh and Rs 1 crore, while the rate of surcharge on income exceeding Rs 1 crore kept unchanged at 15 per cent.
In his last Budget in 2018, among the other measures relating to FD income of senior citizens and making LTCG on equity taxable, Jaitley increased the Health and Education Cess from 3 per cent to 4 per cent and 80D limit for senior citizens from Rs 30,000 to Rs 50,000.
In the Interim Budget in 2019, acting finance minister Piyush Goyal, increased the tax rebate from Rs 2,500 to Rs 12,500 for taxpayers having taxable income up to Rs 5 lakh, so that such taxpayers needn’t pay any tax. Later in the year, in her first Budget present Finance Minister Nirmala Sitharaman introduced new surcharge rates of 25 per cent for income above Rs 2 crore and up to Rs 5 crore and 37 per cent surcharge on income above Rs 5 crore.