The Union Budget ahead of an election was always going to be a lot more about politics than about economics. Not surprisingly, the budget has been liberal in doling out tax exemptions for the middle and lower income tax payers. Here are 3 ways the government has sought to pamper the Aam Aadmi.
Income tax exemption
The Union Budget 2019 has made incomes up to Rs.5 lakhs fully exempt from tax. Of course, this will be given as a tax rebate and not as an exemption. That means; the existing slabs of tax will remain exactly the same. Currently, income up to Rs.3.00 lakhs is entitled to a rebate of Rs.2500 making it entirely tax free. In the new model, that rebate will be increased from Rs.2500 to Rs.12,500 making income up to Rs.5 lakhs fully tax free. The limit for rebate applies to the net taxable income and hence if the person were to avail other exemptions like Section 80C, Section 24 and Section 80D, then the actual exempt income can go as high as Rs.10 lakhs. From the perspective of low tax payers, this is not only a boost to the disposable incomes but also an incentive to invest in specified assets and also to secure the health of the family through health insurance. The overall value of the benefit is likely to be Rs.23,000 crore and that is a huge quantum of purchasing power especially considering that this is the set of people with a high propensity to consume.
Hike in standard deduction
In the previous Budget 2018, the standard deduction was introduced at a flat annual rate of Rs.40,000. However, this was in lieu of medical and transport allowance. This had reduced the overall impact of standard deduction. By increasing the limit to Rs.50,000 per year, the government has actually expanded the benefit of standard deduction vis-à-vis the previous regime. Also, this standard deduction applies to pensioners too and hence should come as an added advantage for senior citizens. The higher limit of standard deduction becomes a lot more valuable when looked at in conjunction with the higher tax exemption.
There are more benefits
That is not all and there are more benefits. The TDS limit on bank and PO deposits has been hiked from Rs.10,000 per year to Rs.40,000 per year. The idea of notional rent on second property has been scrapped encouraging people to invest in second property. Thirdly, the limit of TDS on rent has also been increased higher from Rs.1.80 lakhs to Rs.2.40 lakhs, reducing the compliance burden further. Lastly, there is the added benefit on the capital gains front. Under Section 54F, now you can reinvest the proceeds in two properties instead of just one. This will be a boost to buying properties in smaller towns. It is surely a people-friendly budget! ©