The Budget was a transformational vehicle that targeted more on the middle class and farmers and also set a vision for transforming India into a leading nation of the world
"India is back on track and marching towards growth and prosperity." With these opening remarks, the Interim Finance Minister Piyush Goyal presented the Interim Budget of the BJP Government on February 1, 2019.
In his comprehensive Budget speech, the finance minister addressed the nation towards building a ‘New India’ by 2022 which is clean and healthy, where everybody would have a house with access to toilets, water and electricity; where farmers' income would have doubled; youth and women would get ample opportunities to fulfill their dreams; an India free from terrorism, communalism, casteism, corruption and nepotism.
While making the proposals from the personal tax perspective, Goyal acknowledged the valuable contribution of the taxpayers in nation building and providing a better life to the poor and marginalised sections of society. To express his gratitude and to pass on the benefits from the various tax reforms brought over the years, the finance minister proposed to reduce the tax burden on the middle class taxpayers.
The biggest relief which has been endowed to the middle class taxpayers is allowing full tax rebate for taxpayers earning a taxable income up to Rs 5 lakh. This will impart a direct benefit to approximately 3 crore taxpayers comprising self-employed, small business/ traders, and salaried class. However, it is pertinent to note that the proposed amendment will not have any impact on the taxpayers with an income above Rs 5 lakh as the slabs rates have been kept as unchanged. It clearly shows the intention of the government was to provide relief to the distressed middle class taxpayers and boost their confidence.
Inflating the amount of Standard Deduction by Rs 10,000 was another significant proposal targeting the middle/salaried class taxpayer. The said proposal would now make the total amount available for a deduction to Rs 50,000 as against Rs 40,000 which was introduced last year, thus, leaving even more net-in-hand income for this class.
Considering the socio-economic needs of the middle class taxpayer and to reduce the financial burden of maintaining families at different locations on account of their job, children's education, care of parents, this year's budget proposes to do away with taxing the notional rent on the second residential house property owned by a taxpayer. Accordingly, an individual may now own two self-occupied properties without any hassle of paying tax on notional rent for second property.
The aforesaid amendment as proposed will also have an impact on the relevant provisions applicable for claiming a deduction of interest paid on housing loan. In the current scenario, a deduction up to Rs 2 lakh is allowed in respect of only one self-occupied house property which now will be extended to include two self-occupied properties with an aggregate ceiling of Rs 2 lakh only.
To bring the parity under capital gains provisions, the benefit of rollover of capital gains under section 54 of the Income Tax Act will be increased from investment in one residential house property to two residential house properties for a taxpayer having capital gains up to Rs 2 crore. However, the said benefit can only be availed once in a lifetime.
In the spree of catering the small depositors and non-working spouses, the threshold limit for deduction of TDS on interest from bank/ post office deposits has been increased from Rs 10,000 to Rs 40,000. Similarly, the threshold for TDS deduction on rent has been proposed to increase from Rs 180,000 to Rs 240,000.
To further smoothen the processing of tax returns and to transform the Income-tax Department into a more assessee friendly one, it has been proposed to process the Income-tax returns within 24 hours of filing. This would also ensure speedy disbursement of tax refunds to the taxpayers thereby resulting in healthier working capital.
Further, the government has proposed a human-less structure for all the assessments and verification of Income-tax returns. Within 2 years, all income tax returns will be verified and scrutinised electronically by an anonymised tax system without any human intervention.
In the nutshell, this electoral Interim Budget of the four-and-a-half-year-old NDA government was positioned as a transformational vehicle targeted more on the middle class and farmers and also setting a vision for transforming India into a leading nation of the world.Akhil Chandna is Director – Grant Thornton India LLP with inputs from CA Ajay Arora & CA Pooja Lara.The Great Diwali Discount!
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