Budget 2019: Full rebate on income up to Rs 5 lakh, here's what does it mean for salaried class

Budget 2019: While presenting the interim budget 2019, Finance Minister Piyush Goyal doled out tax sops to salaried class. FM Goyal announced doubling of income tax exemption limit to Rs 5 lakh under 87A of the Income Tax Act. he also announced raising standard deduction to Rs 50,000, and provided concessions on interest income from bank deposits and rent.

"Individuals with income up to Rs 5 lakh will get full tax rebate," Goyal said. 

Read: No tax on income up to Rs 5 lakh, PM Narendra Modi hails budget for 'New India'

He said with this, individuals who are earning gross income of Rs 6.5 lakh per year and have made investments in savings instruments, will be exempt from paying income tax. 

In fact, with additional deductions such as interest on home loan up to Rs 2 lakh, interest on education loans, National Pension Scheme contributions, medical insurance, medical expenditure  on senior citizens etc, persons having even higher income will not have to pay any tax.

Now to be clear, the above tax relief is only for those who are earning up to Rs 5 lakh. However, people who have taxable income of more than rs 5 lakh will not be able to avail this benefit. 

According to the Finance Bill, 2019 the maximum amount of tax rebate under section 87A of the Income Tax Act has been propsosed to increase to Rs 12,500. Currently, the rebate is Rs 2,500. 

It should be noted that proposed tax rebate will be only for individuals having total income up to Rs 5 lakh instead of current Rs 3.5 lakh.

Read: Who gets what in Budget 2019

"This will provide benefit of Rs 18,500 crore to 3 crore middle class taxpayers including self employed individuals and senior citizens," he said. 

He further added that the number of beneficiaries will go up for those who have made investments in mediclaim and pension.
Standard deduction has been raised from Rs 40,000 to Rs 50,000 which will benefit three crore salaried individuals.

Reacting to the proposal,Priti Rathi Gupta, MD and Promoter Anand Rathi Share & Stock Brokers and Founder of Anand Rathi's LXME said, "The FM did what was the need of the hour by encouraging MSMEs and  Women entrepreneurs in boosting the economy.  The increase in basic exemption limit to Rs 5,00,000 will stimulate additional investments and disposable income resulting in more Investment power. I also feel tax breaks for women returning to the workforce will prove to be a push in the right direction".

However, it should be noted that the tax rebate announced by the Finance Minister Piyush Goyal is only a proposal right now, it can’t be passed until the July budget under whichever government comes to power because the proposal is a part of interim budget. 

Read: What Economists think of Budget 2019

No tax will be deducted on interest earned on bank and post office deposits of up to Rs 40,000 annually, up from Rs 10,000 currently.
The Budget also proposed to exempt tax on notional rent for unsold housing units for two years.

Besides, in his speech Goyal also proposed that  benefit of rollover of capital tax gains be increased from investment in one residential house to that in two residential houses, for a taxpayer having capital gains of up to Rs 2 crore.

However, it can be exercised once in a lifetime, he added.

The Income Tax department will move towards faceless assessment and verification of returns, Goyal said. 

TDS threshold increased

Tax Deduction at Source (TDS) threshold on interest earned on bank/post office deposits has been proposed to be raised from Rs 10,000 to Rs 40,000. FM Goyal said, "This will benefit small depositors and non-working spouses". Further, the TDS threshold for deduction of tax on rent has also been proposed to be increased from Rs.1,80,000 to Rs.2,40,000 for providing relief to small taxpayers.