Budget 2019: Tax proposals will increase disposable income of people, improve standard of living

The interim Budget 2019 highlights the achievements made by the government for laying down the foundation for sustainable growth, progress and better quality of life for all people. The finance minister recognised the fact that this was made possible because of contributions made by taxpayers. Keeping this in mind, the finance minister has proposed to pass on the benefits from tax reforms to taxpayers.

Focusing on technology, the interim Budget highlighted its extensive usage for making the life of taxpayers easy, with the return of income to be now processed within twenty-four hours and refunds also to be issued simultaneously. Assessment proceedings, issuance of refunds and resolving queries will all be carried out online.

Considering the protocol of the interim Budget, the finance minister restrained from proposing main tax proposals, while he did announce some relief for middle-class taxpayers. Some of the proposals are discussed under:

Tax rebate

Though there is no change in the tax slab and in the tax rate for the taxpayer, the finance minister proposed a full rebate for resident individual taxpayers having an annual taxable income up to Rs 500,000. The finance minister has also increased the standard deduction for the salaried taxpayers from Rs 40,000 to Rs 50,000. Thus, after considering other deductions available today, the salaried taxpayer earning income up to Rs 7,35,000 and non- salaried taxpayer earning income up to Rs 6,85,000 may not be liable to pay any tax. The same is tabulated as under:

Particulars Salaried taxpayer Non Salaried taxpayer
Gross Total Income 735,000 685,000
Less: Standard Deduction under section 16(ia) 50,000 ---
Less: Deduction under Chapter VI A

-       Section 80C (payments made for specified investments/ purpose)

-       Section 80D (mediclaim insurance premium for self)

-       Section 80TTA (interest on deposits in a savings account)

 

 

150,000

 

 

25,000

 

10,000

 

 

150,000

 

 

25,000

 

10,000

Net taxable annual income 500,000 500,000
Tax payable 12,500 12,500
Less: Rebate under section 87A 12,500 12,500
Net tax payable Nil Nil

Resident individual taxpayers falling in higher income bracket may also get the benefits of no tax depending upon their eligibility for claiming other deductions and/ or exemptions (i.e. house rent allowance, medical insurance premium paid for parents, etc.).

However, this does not absolve the obligation to file a return of income, if the annual taxable income exceeds Rs 2,50,000.

TDS threshold increased

The finance minister increased the threshold on interest earned from deposits with the bank, co-operative societies carrying on banking business and post office from Rs 10,000 to Rs 40,000. The threshold of Rs 5,000 remains unchanged for other interest. Further, the threshold for deduction of tax on rent under section 194I has been proposed to be increased from Rs 1,80,000 to Rs 2,40,000. This will provide relief to small depositors and non-working population earning passive income, as they will be not be required to file their tax return to claim a refund of TDS, if any.

Relief to individuals holding more than one house

Representational image. Reuters

Representational image. Reuters

Currently, income tax on notional rent is payable if a taxpayer has more than one self-occupied house. It has been proposed to exempt the levy of income tax on notional rent on the second self-occupied house. Further, the finance minister proposed to increase the benefit of rollover of capital gains under section 54 from investment in one residential house, to two residential houses for a taxpayer having capital gains up to Rs 2 crore. This benefit can be availed once in a lifetime.

Tax holiday for affordable housing extended

The sunset clause for affordable housing projects has been extended from 31 March 2019 to 31 March 2020. Therefore, housing projects approved by the competent authority on or before 31 March 2020 will be eligible to claim deduction under section 80-IBA. This will lead to more homes available under affordable housing scheme.

An incentive for the real estate sector

In order to boost the real estate sector, the finance minister has extended the period of exemption from levy of tax on notional rent, on unsold inventories, from one year to two years, from the end of the year in which the project is completed.

Overall, the proposals announced in the interim Budget 2019 is a welcome move and will benefit the larger section of the country. It will increase the disposable income of people at large and improve the standard of living. The proposal is in line with the government move of ease of living, growth and prosperity. One needs to wait and watch to see what comes next for taxpayers once the full-fledged Budget is announced by the new government!

(Anjana Singh is Director with Deloitte Haskins and Sells LLP; Niti Shah Manager with Deloitte Haskins and Sells LLP; and Dhrumin Sanghvi Deputy Manager with Deloitte Haskins and Sells LLP contributed to the piece.)

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Updated Date: Feb 05, 2019 13:25:11 IST

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