With an eye on the upcoming Lok Sabha elections, the Union government in its Interim Budget 2019-20 announced a full rebate for individuals with annual income up to Rs 5 lakh in a move that will benefit an estimated 3 crore tax-paying citizens.
In an announcement that will have an impact on the livelihoods of millions of Indians who fall in the lower middle-class bracket, Union Finance Minister Piyush Goyal said, “Individual tax payers having taxable annual income up to Rs 5 lakhs will get full tax rebate.”
“And therefore,” Goyal continued, “[they] will not be required to pay any tax.”
Under the existing tax rates, individuals earning up to Rs 2.5 lakh are not required to pay any taxes whereas those earning between Rs 2.5 lakh to Rs 5 lakh are taxed at 10 per cent.
Read More: Interim Budget 2019 LIVE
The decision was welcomed by loud chants of “Modi-Modi” from the ruling party section in the lower house of Parliament as well as alliance MPs who sounded their approval with a 3-minute long thumping of the desks. Prime Minister Narendra Modi, too, joined the chorus.
In a Budget which was, expectedly, heavy on the populist side, Goyal said that both tax collection and tax base have shown significant increase in the last 4.5 years due to the major reforms undertaken by the government.
“We have made progress towards achieving a moderate taxation high compliance regime,” he said, adding, “Some benefits from tax reforms should go to middle class tax payers.”
Goyal further announced that even those having gross income of up to Rs 6.5 lakh may not be required to pay any income tax “if they make investments in provident funds, specified savings, insurance, etc.”
“With additional deductions persons having even higher incomes will not have to pay any tax,” he said.
“This will provide tax benefit of Rs 18,500 crore rupees to an estimated three crore middle class tax payers comprising self-employed, small business, small traders, salary earners, pensioners and senior citizens,” Goyal said amid continued cheers from the ruling party lawmakers.
“For salaried persons, standard deduction is being raised from current Rs 40,000 to Rs 50,000,” Goyal announced.
“I propose to exempt levy of income tax on notional rent on a second self-occupied house,” he said, adding that this move will benefit those who have to maintain families at two locations on account of their jobs, children’s education and care of parents.
Goyal also raised the TDS threshold on interest earned on bank and post office deposits from Rs 10,000 to Rs 40,000 to benefit the unemployed women and pensioners who keep money in banks.
The TDS threshold on deduction of tax on rent was also increased from Rs 1.8 lakh to Rs 2.4 lakh.
The benefit of rollover of capital gains under section 54 of Income Tax Act, Goyal announced, will be increased from investment in 1 residential house to 2 residential houses for a taxpayer having capital gains up to Rs 2 crores.
Before making the announcements, Goyal said that convention dictates that the main tax proposals are presented in regular Budget but “small tax payers need certainty in their minds and therefore proposals for such class of persons should not wait”.
He said that the existing tax rates will continue for FY 19-20.
Goyal also thanked taxpayers for their contribution to nation building and for providing better quality of life for the marginalised communities by paying taxes which fund the various schemes of the government.