Tax burden for salary below Rs 5 lakh category individuals is reduced by Rs 3000
Limit of deduction for rent paid under section 80GG is increased from Rs 24000 to Rs 60000 per year. This applies to those who do not own a house and also do not get a house rent allowance from the employer. Another positive announcement came on the National Pension Scheme. FM proposed to make withdrawal up to 40% of the corpus at the time of retirement tax exempt in the case of NPS. Annuities paid by NPS are taxable in the hands of the annuitants. Tax treatment of the withdrawal is subject to tax as per extant regime. This new rule makes NPS more attractive now.
In case of superannuation fund and recognized provident funds including EPF, the same norm of 40% of corpus to be tax free will apply for the corpus created after 1st April 2016. Also the annuity funds which go to the legal heir after the death of pensioner will not be taxable.
The tax on 60 per cent of withdrawals from Employee Provident Fund (EPFO) in respect of contributions made from 1 April 2016 (in respect of employees with salary above specified threshold) is probably an effort to bring taxation of various retiral schemes (e.g. NPS, super annuation and Employee Pension Scheme) on par. This is big dampener for those who heavily relied on EPF to plan their retirement.
Finance Minister did not give any hike in basic exemption limit or investment limit under section 80C.