Expert Opinion on Union Budget 2019 Expectations: As per the Budget announcement, individuals with income up to INR 5 lakhs will not have to pay any income tax.
Budget 2019 Expert Opinion on Budget Expectations: Individual taxpayers much more than just a ‘Thank You’ from the Finance Minster in the Union Budget 2019-20 Breath were held before the FM come to Part-B of his Budget Speech and announced relaxation for the individual taxpayers. In Part-B of the speech, the Finance Minister thanked the taxpayers and assured them that the Government has used the tax contribution to serve the poor and create better infrastructure in the country. This being the current Government’s last budget before the general elections later this year, speculation was rife that tax sops, new schemes and tax changes would be in the offing.
The Government, has indeed, handed over a "goodies bag" to the individual taxpayers in the form of beneficial announcements. As per the Budget announcement, individuals with income up to INR 5 lakhs will not have to pay any income tax. FM mentioned that individuals with gross income up to INR 6.5 lakh will not need to pay any tax if they make investments in provident funds and prescribed equities. Though a meagre increase, the standard deduction has been pegged up from existing INR 40,000 to INR 50,000. Budget 2018 had introduced a standard deduction of INR 40,000 for the salaried class, in lieu of deductions of INR 15,000 for medical reimbursement and INR 19,200 for transport allowance. TDS thresholds for interests on post office and bank deposits have been raised from Rs 10,000 to Rs 40,000. This would result in higher interest credits, a part of which was getting locked on account of TDS, to be subsequently claimed as refunds by the taxpayers falling under the exemption thresholds.
On the housing side, as an amendment to Section 54 of the Income Tax Act, the benefit of rollover of capital gains has been proposed to be increased from one residential house to that of two now, for a taxpayer having capital gains upto INR 2 crores. This benefit could be exercised once in the lifetime of the taxpayer. The requirement of deducting tax at source is now applicable if the annual rental payment exceeds INR 2.4 lakhs. This has been increased from the earlier annual limit of Rs 1.8 lakhs. Presently, income tax on notional rent is payable if one has more than one self-occupied house. Considering the difficulty of the middle class having to maintain families at two locations on account of their job, children’s education, care of parents etc, the Finance Minister has proposed to exempt levy of income tax on notional rent on a second self-occupied house. Even though the Finance Minister considers inflation as “hidden and unfair tax” on middle class, and the home loan rates on the rise, the existing deduction of INR 2 lakhs has not been tinkered.
Overall, the Budget announcements would bring big cheer to the middle-class. The Government can clearly ask the question “How is the josh?” to its individual taxpayer citizens now, to get an answer – “Much High”.
(By Suraj Nangia, Partner and Sandeep Jhunjhunwala, Director, Nangia Advisors LLP (Andersen Global)