Most income taxpayers were seeking more tax exemptions, which in turn would have boosted savings, consumption and investment.
Union Finance Minister Nirmala Sitharaman on Friday presented the first Budget of the Modi government 2.0. This was also her first Budget after she took over as Finance Minister from Arun Jaitley who held the charge of the ministry in the last Narendra Modi government.
While middle-class income taxpayers were expecting some major relief, it did not come for them. However, the highest earners in the country will now have to pay additional surcharges on their income tax. She said the hike in surcharge was meant to increase the contribution of the highest earners to the nation's development.
Most income taxpayers were seeking more tax exemptions, which in turn would have boosted savings, consumption and investment. However, contrary to the expectations of the common man, the finance ministry did not tinker much with tax slabs and rates, barring an additional surcharge of 3% for people with taxable incomes between Rs 2 crore and Rs 5 crore, and 7% for those with incomes beyond Rs 5 crore.
She also proposed several tax sops for middle-income earners, which in turn would bring down their income tax. The Budget has provided for tax deductions for those buying homes under the affordable housing scheme.
There is also tax relief on interest paid on loans for electric vehicle (EV). Taking all this into account, an individual drawing a salary of up to Rs 12 lakh may not have to pay any tax if all exemptions are availed.
Here is how you can save your tax if you are earning less than Rs 12 lakh a year:
1. Tax deductions for affordable home buyers
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The Budget has provided for tax deductions for those buying homes under the affordable housing scheme.
There is an additional deduction of Rs 1,50,000 on interest on home loans for affordable houses up to Rs 45 lakh till March 31, 2020. This is over and above the existing available deduction of Rs 2,00,000.
This means that those in the 30% tax bracket will avail tax incentives of up to Rs 45,000 while those in the 20% and 10% brackets can seek relief up to Rs 30,000 and Rs 15,000, respectively.
2. Purchase of electric vehicle
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There’s an additional income tax deduction of Rs 1.5 lakh on interest on loans taken to buy an electric vehicle if the owner had no other electric vehicle while making the purchase. Furthermore, GST rates on electric vehicles have been lowered from 12% to 5%.
3. Withdrawal from NPS
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A lump sum withdrawal to the extent of 60% from the National Pension Scheme (NPS) is also exempt from tax.
4. No income tax for taxable income of up to Rs 5 lakh
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There is no income tax up to Rs 5 lakh. The proposal was made in February this year when Finance Minister Piyush Goyal presented the interim Budget. Taking all the rebates and exemptions, it was calculated that individuals earning up to Rs 9.5 lakh can escape liability by taking advantage of saving schemes. Later replying to the debate on the Finance Bill in Lok Sabha, the Minister said as per the calculations done by the officials, an individual having income of Rs 9 to Rs 9.5 lakh can escape income tax liability by taking advantage of the host of tax savings schemes under the Income Tax Act.
5. Focus On Savings
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Deduction of Rs 1,50,000 on interest on home loans for affordable houses up to Rs 45 lakh till March 31, 2020.
This deduction is over and above the existing available deduction of Rs 2,00,000.
Goods and Services Tax (GST) rates on electric vehicles have been lowered from 12% to 5%.
6. Other taxpayers-friendly announcements
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In another friendly move, taxpayers can choose between PAN card and Aadhaar card to file their income tax returns. This means that those people who do not have a PAN card can now use their Aadhaar number.
Also, to ease the income tax returns filing process, pre-filled ITRs would be made available to taxpayers by collecting and collating the information available from banks, stock exchanges, mutual funds, and so on.
7. Income up to Rs 12 lakh a year? Pay zero tax: Here is how
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Avail maximum deductions by managing your income smartly and you don't have to pay any tax.
