The budget presented by the Finance Minster Piyush Goyal on February 1, 2019 has proposed to take certain important steps that will go a long way in impacting every strata of the society.
By reducing the tax burden on the taxpayers, the immediate impact is that it leaves more money in the hands of the individuals. Now, it depends on the taxpayers whether to spend it or put the savings in taxes to optimum use for the long term.
Before we look at this year’s budget proposals, here’s a look back on some of the tax changes in the recent years. The basic exemption limit was increased from Rs 2 lakh to Rs 2.5 lakh and gave tax rebate so that no tax was payable by persons having income up to Rs 3 lakh. Also, the tax rate was reduced from 10% to 5% for the tax slab of Rs 2.5 lakh to Rs 5 lakh and introduced Standard Deduction of Rs 40,000 for the salaried class. And most importantly, deduction of savings under section 80C was increased from Rs 1 lakh to Rs 1.5 lakh, while deduction of interest for self-occupied house property was raised from Rs 1.5 lakh to Rs 2 lakh.
The above structure has been kept constant in this year’s budget. In spite of not changing the income slabs or tax rates, this year budget has been able to reduce individuals tax liability. How? Here are those tax proposals that the FM has talked about in his budget speech. Let’s look at each of them.
No tax for income up to Rs 5 lakh
Individual taxpayers having taxable annual income up to Rs 5 lakh will get full tax rebate and therefore, will not be required to pay any income tax. The income tax slabs are no being modified and neither there is any change in the tax rates. The amendment is proposed to happen in the section 87A of the Income-tax Act to provide relief to the individual taxpayers by increasing the maximum amount of tax rebate to Rs 12500 from existing Rs 2500. The tax rebate shall now be admissible to taxpayers having total income up to Rs 5 lakh, instead of existing Rs 3 lakh.
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