Budget 2019-20 India Income Tax Slab Rates Changes: Announcing the Interim Budget, acting finance minister Piyush Goyal on Friday proposed that individuals earning up to Rs 5 lakh would get a full tax rebate. This will provide tax saving of up to Rs 12,500 for all taxpayers in this bracket. Those who save more can effectively push this rebate up to an income of Rs 6.5 lakh.
Since this is a rebate and not a slab change, it will not impact the tax incidence of those with larger incomes though it will have some impact for those whose salaries are under Rs 10 lakh as they can add home loans and tuition fees to get additional benefits.
Goyal also announced that interest income of up to Rs 40,000 will attract no tax. However, he left its implementation to the next government for the full-fledged Budget after the Lok Sabha elections.
Goyal also said standard deduction would be raised from Rs 40,000 to Rs 50,000. Finance Minister Arun Jaitley had in Budget 2018 introduced a standard deduction of Rs. 40,000 for the salaried class. This additional deduction was proposed in lieu of existing deductions of Rs 15,000 for medical reimbursement and Rs 19,200 for transport allowance.
“Individual taxpayers having taxable annual income up to Rs 5 lakh will get a full tax rebate and therefore will not be required to pay any income tax. As a result, even persons having gross income up to Rs 6.50 lakh may not be required to pay any income tax if they make investments in provident funds, specified savings, insurance etc,” Goyal said
“In fact, with additional deductions such as interest on home loan up to Rs 2 lakh, interest on education loans, National Pension Scheme contributions, medical insurance, medical expenditure on senior citizens etc, persons having even higher income will not have to pay any tax. This will provide a tax benefit of Rs 18,500 crore to an estimated three crore middle-class taxpayers comprising self-employed, small business, small traders, salary earners, pensioners and senior citizens.”
Goyal further said the tax interface would be made simpler, resulting in an increase in tax collections and return filings. The Union minister said tax scrutiny would be done electronically and there will be no interaction between the tax authority and the taxpayer.
“Within nearly two years, almost all assessment and verification of IT returns will be done electronically by an anonymized tax system without any intervention by officials. All income tax returns to be processed within 24 hours and refunds to be issued simultaneously,” Goyal said.
He said direct tax collections were up from Rs 6.38 lakh crore in 2013-14 to almost Rs 12 lakh crore. He said the tax base was also up from Rs 3.79 crore to Rs 6.85 crore.
Following a drubbing in the elections to the three Hindi heartland states of Rajasthan, Chhattisgarh and Madhya Pradesh amid growing resentment among the middle class, there was pressure on the Centre to provide relief in personal tax.
In Budget 2018, then Finance Minister Arun Jaitley increased cess on income tax to 4 per cent from 3 per cent across the board for taxpayers but did not change the existing tax slabs and income tax rates.
As per the slabs announced in the last Budget, for individuals below 60 years, income up to Rs 2.5 lakh was exempt from tax. Five per cent tax was levied on income between Rs 250,001 to Rs 5 lakh; 20 per cent tax on income between Rs 500,001 and Rs 10 lakh; and 30 per cent tax on income above Rs 10 lakh.
For senior citizens (aged 60 years or above but less than 80 years), income up to Rs 3 lakh was exempt from tax. Income from Rs 300,001 to Rs 5 lakh was taxed at 5 per cent, from Rs 500,001 to Rs 10 lakh at 20 per cent and above Rs 10 lakh at 30 per cent.
For senior citizens aged 80 years and above, income up to Rs 5 lakh was exempt from tax. Income from Rs 500,001 to Rs 10 lakh is taxed at 20 per cent and above Rs 10 lakh was taxed at 30 per cent.
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