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Interim Budget brings relief to individual taxpayers; rebate under section 87A hiked to Rs 12,500 for income up to Rs 5 lakh

Archit Gupta
Standard deduction for the salaried class in its new avatar is one-size-fits-all — it is the same for both the CEO of a company and his lowly minion at the bottom of the heap.

The announcement of the Interim Budget 2019 in the wake of the upcoming general elections had plenty in store for individual taxpayers. There are multiple reforms focused just on easing the individuals' tax bite. While some changes took a drastic jump from their existing status quo like in the case of the increased limit of TDS on Post Office saving deposits and bank deposits, others slight, but equally significant improvements.

Following are some of the benefits that have garnered a widespread positive response from individual taxpayers.

Section 87A limit increased to reduce the tax burden

The Section 87A limit of Rs. 3,50,000 has been hiked to Rs. 5,00,000 to help bring down taxes for those earning up to Rs 5 lakh. Individuals earning total income within Rs. 5,00,000 in the financial year 2019-20 will stand to benefit from this change. This has been done by increasing the maximum rebate allowed under section 87A to Rs. 12,500 from Rs. 2,500.

Standard deduction increased:

The announcement to raise the limit for standard deductions from the existing Rs.40,000 to Rs.50,000, as applicable from FY 2019-20 will reduce taxes for all salaried taxpayers. Pensioners also stand to benefit from this increase.

Section 54 benefits extended further

Section 54 of The Income Tax Act 1961 has been amended to help taxpayers invest their capital gains in two properties instead of one. For taxpayers with long term capital gains of up to Rs 2 crores, this benefit will help them claim exemption if they want to split their capital gains investment into two properties. This is a significant improvement even though the benefit can only be claimed once in the lifetime of the taxpayer.

Increased TDS limit on the post office and bank deposits

The TDS limit on the interest income earned on Post Office and bank deposits has been increased from Rs. 10,000 to Rs. 40,000. While such interest income continues to be taxable, only the threshold for TDS has been increased. There are fresh changes made to the limit of tax deductions (TDS) on rent as well. The current limit of Rs. 1,80,000 has been increased to Rs. 2,40,000.

Budget 2019
Total Income Tax payable before cess Rebate u/s 87A Tax Payable + 4% Cess
2,70,000 1,000 1,000 0
3,60,000 5,500 5,500 0
5,00,000 12,500 12,500 0
7,50,000 62,500 0 62,500+2,500
12,00,000 1,72,500 0 1,72,500+6,900
Budget 2018
Total Income Tax payable before cess Rebate u/s 87A Tax Payable + 4% Cess
2,70,000 1,000 1,000 0
3,60,000 5500 0 5500+220
5,00,000 12,500 0 12,500+500
7,50,000 62,500 0 62,500+2,500
12,00,000 1,72,500 0 1,72,500+6,900

**Complied by ClearTax 

Respite for owners of two house properties

For those owning two house properties, the taxpayers can now claim the second house property as a self-occupied property. As per the new norm, the owner will be able to calculate the income from such house properties with no tax being deducted on the notional rent of the second property.

(The author is founder and CEO, ClearTax)

Income tax calculator

 

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