Explaining the rationale for providing tax relief to lower middle class with annual income of Rs 5 lakh, Goyal said, "This neo-middle class required certainties about their future tax liabilities and save them from refund process, we have given benefit to this category".
Budget 2019: Finance Minister Piyush Goyal Friday presented the budget in the Lok Sabha. Among other things, the budget proposed to double the threshold tax exemption limit to Rs 5 lakh and increased the standard deduction to Rs 50,000 from Rs 40,000.
Explaining the rationale for providing tax relief to lower middle class with annual income of Rs 5 lakh, Goyal said, "This neo-middle class required certainties about their future tax liabilities and save them from refund process, we have given benefit to this category".
But what does it really mean? Below we have explained the same in details.
1. What Piyush Goyal said?
)
Finance Minister Piyush Goyal during his budget speech said that the individuals earning taxable income upto Rs 5 lakh will get full tax rebate. An exemption, when given, becomes applicable to all.
2. What is an exemption?
)
Currently, there is a tax exemption available for income up to Rs 2.5 lakh. This means it is applicable for all whether their salaries are Rs 1,80,000 per annum or Rs 25,00,000 per annum. However, there are certain components which are exempted from tax such as HRA and Leave travel concession.
3. Income Tax Rebate
)
According to 87A Income Tax Act, if your annual income is less than Rs 3 lakh under the current provisions, then you can claim a rebate of up to Rs 2,500. However, in view of the new proposal, the limit of Income-tax Rebate under section 87A has been increased to Rs 12,500 from Rs 2,500 for taxpayers having income up to 5 lakh.
4. What does the experts say?
)
Balwant Jain, tax expert and investment advisor, explains that if your income is Rs 8 lakh rupees annually and you save or spend Rs 2.5 lakhs in a year through all measures of Section 80C, 80D, 80CCD (1B) NPS your taxable income becomes Rs 5.5 lakh.
Now the perception is that one with taxable income of Rs 5.5 lakh will have to pay taxes on Rs 50,000. Jain also informed that there is no change in the tax slab and neither in the tax rate.
However, if you invest and exhaust all the possible exemptions offered under the various act of Income tax, you can save big on taxes.
5. Other benefits for salaried class
)
Dharmesh Kant, Head – Retail Research, IndiaNivesh Securities explained other benefits proposed in the interim budget.
Increase in threshold limit to Rs 5 lakh will reduce tax burden of middle and lower middle class tax payers
·
Increase in standard deduction for salaried class from Rs 40, 000 to Rs 50,000
·
Increase in TDS threshold limit for interest income from Rs 10, 000 to Rs 40,000
·
Exemption from notional rent for two self -occupied house as against one
·
Exemption from long term capital gain arising from sale of house property under section 54 is extended towards investment in two houses instead of one
·
