The interim budget, deemed as an ‘election budget,’ did not disappoint the voters, with sops for both rural and the urban electorate. Interim Finance Minister Piyush Goyal who presented the budget on Friday, 1 February, delivered for the middle class with a substantial tax relief along with incentives for the farm sector.
The overall tax exemption doled out to the middle-class will fetch over Rs 22,000 crore consumption stimulus to the economy.
Breaking Down Rs 22,000 Cr Consumption Stimulus
Among the tax relief announced to the middle-class, the full tax rebate for individual taxpayers having taxable annual income up to Rs 5 lakhs is the mouth-watering one. As a result, even persons having gross income up to Rs 6.5 lakhs need not pay any income tax, provided they have investments in provident funds, specified savings and the like.
That’s not all, the additional deductions like the interest on home loans up to Rs 2 lakhs, interest on education loans, National Pension Scheme contributions, medical insurance, among others, will not have to pay any tax.
The government’s move is estimated to benefit over 3 crore middle-class taxpayers comprising small business traders, pensioners and senior citizens with a tax break of Rs 18,500 crore.
In another small relief to the salaried class, the standard tax deduction has been increased from Rs 40,000 to Rs 50,000. Remember, Finance Minister Arun Jaitley had introduced a standard deduction of Rs 40,000 for the salaried class in the last year’s Budget. This will benefit more than 3 crore salary earners and pensioners with Rs 4,700 tax benefit.
Further, the TDS threshold on interest earned on bank or post office deposits is being raised from Rs 10,000 to Rs 40,000, benefiting small depositors and nonworking spouses. The TDS threshold for deduction of tax on rent is proposed to be increased from Rs 1,80,000 to Rs 2,40,000, providing relief to small taxpayers as well.
With the exemption of income tax on notional rent on a second self-occupied house, the government has further eased the burden on the middle-class households who maintain families at more than one location.
The benefit of rollover of capital gains under section 54 of the Income Tax Act will be increased from investment in one residential house to two residential houses for a tax payer having capital gains up to Rs 2 crore. However, this benefit can be availed once in a life time.
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