Stand-in Finance Minister Piyush Goyal presented the interim budget on February 1, 2019. It proposes tax breaks and sops that will have a positive impact on your finances.
The new government that takes charge after the approaching elections will present a full budget.
The interim budget proposes sops for the middle class, farmers, and unorganized sector employees. Those who earn up to Rs.5 lakhs per year will not have to pay any income tax. The tax-free income level has doubled from Rs.2.5 lakh to Rs.5 lakh, which is a significant tax break.
A large section of the middle class will now be below the income tax threshold. In effect, a little tax planning can help a person with a monthly income of around Rs.60,000 to avoid paying any income tax.
Mr. Piyush Goyal, who is a Chartered Accountant (CA) by training, advised on ways to pay less tax. He said that Provident Fund, insurance, and other Section 80C investments could raise the tax exemption threshold to Rs.6.5 lakh. A little more saving could increase the limit to Rs.7 lakh.
People who sell their houses will now get capital gains exemption if they buy two houses. Earlier, capital gains exemption applied to a single home purchased within a year.
Income tax will not apply to notional rent on a second self-occupied house. Earlier, income tax was payable on notional rent on a second house, even if it was self-occupied.
These changes solve practical problems taxpayers face. However, the long-term capital gains (LTCG) tax on equity mutual funds remains, and there is no increase in the Section 80C investment limit.
Let’s take a closer look at Interim Budget 2019 and how it will impact your finances:
Benefits for income taxpayers
Full tax rebate on income up to Rs.5 lakh
Individual taxpayers who earn up to Rs.5 lakhs per annum will get a full tax rebate. Taxpayers in this bracket will save up to Rs.12,500 in tax. However, you will still have to file a tax return if you earn more than Rs.2.5 lakh.
As the income tax slabs are unchanged, this rebate will not benefit people with higher incomes. However, those who earn less than Rs.10 lakhs can get extra benefits by adding tuition fees and home loans.
If your income exceeds Rs.5 lakh, you will still have to pay tax at existing rates. You will have to pay 5% tax on income between Rs.2.5 lakh and Rs.5 lakh, 20% tax on income between Rs.5 lakh and Rs.10 lakh, and 30% tax on income over Rs.10 lakh.
Gratuity ceiling doubled
The gratuity ceiling has increased from Rs.10 lakh to Rs.20 lakh. Employees who have worked for at least five years in an establishment with 10 or more people can get gratuity.
Standard deduction increased
The standard deduction has increased from Rs.40,000 to Rs.50,000. The benefit of standard deduction applies to salaried employees and pensioners.
Invest to stay within the tax-free limit
Those who have a gross income of up to Rs.6.5 lakhs will not have to pay any tax. They can invest up to Rs.1.5 lakh in Provident Fund (PF), insurance, and other savings specified under Section 80C.
The threshold for TDS on home rent has increased
The limit for TDS on home rent has risen from Rs.1.8 lakh to Rs.2.40 lakh. TDS on home rent is the tax that a person who pays rent has to deduct.
Also read: Should you invest in a Second Home or not?
The threshold for TDS on interest on deposits has increased
The limit for TDS on interest earned on bank and post offices deposits has increased from Rs.10,000 to Rs.40,000. This increase is a big help for small savers who have been forced to claim TDS refunds.
Capital gains exemption allowed on the purchase of two houses
You can invest capital gains of up to Rs.2 crore from the sale of immovable property in two residential properties. At present, such gains are tax-free if you buy another house within one year. This benefit is only available once in a lifetime.
Relief on notional rent for developers
The income tax relief on notional rent on unsold houses will apply for two years instead of one year. This extension will help developers who have a large inventory of unsold flats.
No tax on notional rent on the second house
Income tax will not apply to notional rent on a second self-occupied house. At present, income tax on notional rent applies if you have more than one home, even if it is self-occupied.
Speedy processing of IT returns
Income tax returns will be processed within 24 hours and refunds will be immediate. Most income tax returns will be assessed and verified through anonymous electronic means.
Benefits for farmers
1. Small and marginal farmers who have up to two hectares of land will get income support of Rs.6,000 per year. The funds will be transferred to their bank accounts in three installments of Rs.2,000 each.
2. Farmers affected by natural calamities will get 2% interest subvention. An extra 3% interest subvention will apply if they pay on time.
3. Farmers engaged in animal husbandry and fishery will get 2% interest subvention through Kisan Credit Cards.
Pension for unorganized sector workers
1. Unorganized sector workers who earn up to Rs.15,000 per month will get a monthly pension of Rs. 3,000 when they retire at the age of 60.
2. Workers will have to contribute Rs.100 per month to this scheme during their working years from the age of 29 to 60.
Interim Budget 2019 solves practical problems faced by taxpayers. The tax-free income level has doubled from Rs.2.5 lakh to Rs.5 lakh per year. There is a big incentive for people in the Rs.5 lakh to Rs.7 lakh income range to start making tax-saving investments. Tax planning and investments can reduce your tax burden. MyMoneySage.in can help you to make the right tax-saving investments at zero commission.