While campaigning in the rough-and-tumble of Amritsar, the Union Finance Minister who unsuccessfully contested the polls made a giant promise to individual tax payers. Arun Jaitley had promised to raise the personal income tax exemption limit from Rs 2 lakh to Rs 5 lakh if the Bharatiya Janata Party (BJP) came to power.
This was indeed a big promise. The Parliamentary Standing Committee headed by former Finance Minister and BJP leader Yashwant Sinha in 2012 also recommended raising the income tax exemption limit to Rs 3 lakh for individual tax payers.
But no such sort of thing happened for close to 3.5 crore people who have been living in the age of high inflation in Narendra Modi government’s maiden budget presented by Jaitley. Compared to the big election promise, the 61-year old finance minister scaled down his own wishlist and proposed only Rs 50,000 relief for individual tax payers.
“I propose to increase personal income tax exemption limit by Rs 50,000, that is, from Rs 2 lakh to Rs 2.5 lakh in the case of individual taxpayers who are below the age of 60 years,” Jaitley said in Parliament. The last time P Chidambaram raised the limit from Rs 180,000 to Rs 2 lakh was in 2012.
The rising number of senior citizen population also benefitted from this budget. For people above 60 years old, the finance minister proposed to raise the exemption limit from Rs 2.5 lakh to Rs 3 lakh.
As per the current structure, there is no tax on income of up to Rs 2 lakh per annum; 10% on Rs 2-5 lakh; 20% on Rs 5-10 lakh and 30% on income beyond Rs 10 lakh. However, in the proposed budget, there is no change to country’s income tax rate.
The UPA government had introduced Section 80C in 2005-06 with a limit of Rs 1 lakh. As the government increased the limit of 80C, it is likely to lead to a loss of Rs 15,500 crore for the exchequer. However, the government did not change the reimbursement for medical expenditure at Rs 15,000, which was decided in 1998.
There was also relief for the investment limit under section 80C. “To encourage domestic investment in long term savings, I propose to increase the investment limit under section 80C of the Income-tax Act from Rs 1 lakh to Rs 1.5 lakh,” Jaitley said. According to the finance minister, the aim is to boost increase in savings. In the PPF Scheme, Jaitley announced enhancing annual ceiling to Rs 1.5 lakh per annum from the current Rs 1 lakh.
Jaitley also gave boost to middle and lower-middle class homebuyers. “To reduce this burden (high cost financing), I propose to increase the deduction limit on account of interest on loan in respect of self occupied house property from Rs 1.5 lakh to Rs 2 lakh,” he said.