HIGHLIGHTS OF INTERIM BUDGET 2019-20: TAX BENEFITS

Recently, the Union Minister for Finance, Corporate Affairs, Railways and Coal, Shri Piyush Goyal has presented the Interim Budget 2019-20 in the Parliament of India on 01.02.2019. This Budget is said to provide a relief to the middle-income group, farmers, medium and small enterprises and traders, etc.

Until now, the tax benefits given to the middle-class tax payers had included:

Basic exemption limit had been maintained at Rs. 2.5 Lakh;

Tax rate had been kept at 5% for the income tax slab of Rs. 2.5 Lakh to Rs. 5 Lakh;

Standard deduction, a flat amount deducted from the salary of an employee before computing the taxable income, of Rs. 40,000 had been introduced for the salaried class;

Deduction from taxable income of savings in respect of life insurance premium, provident fund contributions, etc as in Section 80 C of Income Tax Act 1961 as amended thereof had been maintained at Rs. 1.5 Lakhs

Deduction from taxable income of home loan interest for self-occupied house had been maintained at Rs. 2 Lakhs

It has been observed that in the Financial Year 2017-18, there has been an increase in the filing of income tax returns, tax collections nearly doubled to Rs. 12 Lakh Crore, etc. Thus, vide Interim Budget 2019-20, the Government has decided to pass on the following benefits from the tax reforms to the middle-class taxpayers:

Persons not required to pay any income tax:

Those having taxable annual income up to Rs. 5 Lakhs

Those having gross income up to Rs. 6.50 Lakhs, only if they make investments in provident funds, specified savings and insurance etc

Persons having higher income also not required to pay any income tax after the following deductions from taxable income:

Interest on home loan up to Rs. 2 Lakh

Interest on education loans

Contributions towards National Pension Scheme, medical insurance, medical expenditure on senior citizens etc

These tax sops may provide tax benefits of Rs. 18,500 Crore to an estimated 3 Crore middle class taxpayers comprising of self-employed, small businesses and traders, salary earners, pensioners and senior citizens.

Standard deduction, prior to computing taxable income for salaried persons, has been raised to Rs. 50,000. This may provide additional tax benefit of Rs. 4,700 Crore to more than 3 Crore salary earners and pensioners

Tax benefit proposals:

To exempt levy of income tax on notional rent, i.e. a rent that one would have earned if the property would have been let out, on a second self-occupied house. This is in consideration of the difficulties faced by the middle-class people who have to maintain families at two locations on account of their job, education of their children, care of parents etc.

To increase the tax deducted at source (TDS) threshold for deduction of tax on rent to Rs. 2,40,000 for providing relief to small taxpayers

Increase in TDS threshold on interest earned on bank deposits or post office deposits to Rs. 40,000 for providing benefit to small depositors and non-working spouses

Also, the existing rates of income tax would continue

Extension of deadline to 31.03.2020 to avail tax benefits for affordable housing under Section 80- IBA of Income Tax Act 1961 as amended thereof

Extension of tax exemption period on notional rent, on unsold inventories, to two years

Rollover of payment of capital gain tax is allowed if a person can show investment of capital gains up to Rs. 2 Crore in two residential houses

Processing of returns and refunds to be fast tracked in two years with the help of advanced technology

In the said Interim Budget 2019-20, the Government has aimed at reducing the tax burden on middle class families and reportedly, the middle-class tax payers have welcomed these tax convenient reforms.

Harini Daliparthy

Senior Legal Associate

The Indian Lawyer