New Delhi: In what may come as good news for middle-class taxpayers in Finance Minister Nirmala Sitharaman’s maiden Union Budget 2019, the government is likely to raise the basic tax exemption limit for an individual income tax payee to Rs 3 lakh from Rs 2.50 lakh at present to cover for the inflationary impact over the years. (Catch LIVE Updates of Union Budget 2019 Here)
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In February while presenting the Interim Budget 2019-20 in Lok Sabha, the then acting Finance Minister Piyush Goyal had announced full tax rebate for people earning up to Rs 5 lakh per annum. He had also announced that the individuals with gross income up to Rs 6.5 lakh will not need to pay any tax if they make investments in provident funds and prescribed equities. The measure was said to benefit around 3 crore middle-class taxpayers. Read: Union Budget 2019: Here’s What to Expect From Sitharaman’s Maiden Budget Also Read - Centre Working on Fresh Economic Package to Address 2nd Wave of Coronavirus: Report
Industry chamber Assocham, in its pre-Budget memorandum, had also suggested raising the basic exemption limit for an individual income tax payee to Rs 5 lakh from Rs 2.50 lakh, in the backdrop of inflationary impact over the years. (Complete coverage on Union Budget 2019) Also Read - India's Direct Tax, Advance Tax Collections Grow Despite Covid Pandemic, Net Collections at Rs 9.45 lakh crore
“Considering the inflation over the years, tax exemption limit should be increased from Rs 2,50,000 to Rs 5,00,000,” the chamber’s memorandum to the Finance Ministry stated.
Meanwhile, reports claimed that Sitharaman’s Budget will reward the middle-class by increasing the ability to buy their dream home. In this regard, the tax deduction limit on interest on home loans may be increased to Rs 2.5 lakh a year from the present Rs 2 lakh limit. But this enhanced benefit will come with withdrawal of deduction for interest on second house that was allowed earlier.
At present, income up to Rs 2.5 lakh is exempt from personal income tax. Income between Rs 2.5-5 lakh attracts 5 per cent tax, while that between Rs 5-10 lakh is levied with 20 per cent tax. Income above Rs 10 lakh is taxed at 30 per cent. Rs 5 lakh exemption is only applicable to individuals of over 80 years.