While the Interim Budget 2019 has not increased the basic exemption limit from Rs.2.50 lacs, which has remained unchanged for the last five financial years, it has increased tax rebate under Section 87A from Rs.2,500 to Rs.12,500 and would cover taxpayers having taxable income up to Rs. 500,000. Basically the finance minister has given a full tax rebate for individuals earning an annual income of Rs. 5 lakh and now they won’t be required to pay income tax. Suresh Surana, Founder of RSM Astute Consulting said,
“The tax rate for individuals having taxable income exceeding Rs.2.50 lacs and up to Rs. 5 lacs is 5 per cent resulting in a tax of up to Rs.12,500. Due to increase in tax rebate, individual resident taxpayers having taxable income up to Rs.5 lacs can claim the entire tax as tax rebate. The above deductions of Rs.4.25 lacs coupled with tax rebate means that individual resident taxpayers having income up to Rs.9.25 lacs can escape the tax net.”
This is a significant jump which will help the middle-income tax payers to save more upto Rs.12,500 under this tax slab. Further the standard deduction has also been increased by Rs 40,000 to Rs 50,000. In the words of Ranen Banerjee, Partner, PwC India: “The income tax sops for the taxpayers will lead to higher disposable incomes for discretionary spends. This will support demand uptick. We expect credit growth from some of the banks coming out of the PCA (Prompt Corrective Action) framework and realisation of 3 lakh crore rupees of NPAs as announced.” Other changes which were announced were TDS on interest from post office deposits has been increased to 40000 from 10000.
Also the TDS threshold limit on rental income raised to Rs. 2.4 lacs from Rs. 1.8Lacs. The minister has proposed to extend the benefit of self-occupied property to two houses, if it is vacant. Presently one can only do this with one house property. “The changes to the capital gains from sale of house property, being allowed to be invested in 2 properties instead of one and the 10 year window for registration of affordable housing projects for getting tax relief will provide a boost to the real estate sector and consequently to construction activity. We expect good tailwinds to the India growth story from these announcements in the budget," explains Banerjee.
However some expert feel this move won’t bring any major changes. “Capital exemption on sale of one house property extended to two. Keeping in mind the current real estate price, the move does not look to be that beneficial for Aam Janata,” says Partho Dasgupta, Partner, Tax & Regulatory Services, BDO India. The Union minister also said that tax scrutiny will be carried electronically with no interaction taking place between the tax payer and the tax authority. Overall the budget has proposed major impetus for discretionary consumption for both rural and urban class. “The Interim Budget 2019-20 is truly a progressive budget for farmers, lower-income groups and small taxpayers. The proposals to increase the threshold limit of Section 87A relief & Standard Deduction and relaxing the TDS norms, will not only incentivize the small and honest taxpayers but it also help the Govt. in reducing the tax administrative cost,” highlights Naveen Wadhwa, DGM, Taxmann.com.