Basic tax to be raised to Rs 3 lakh from Rs 2.50 lakh in 2019’s budget

Nirmala Sitharaman, representing the Finance Minister on Friday said the middle-class taxpayers may have so much to cherish about the Budget offers.

As per the sources, the Budget 2019-20 will take the sops as declared in the Interim Budget notably raising the basic tax exemption limit for an individual income tax payee to Rs.3 lakh from Rs.2.50 lakh earlier to cover for the inflationary impact over the years.

In the Interim Budget, the government had proposed a rebate on all payable taxes if an individual’s taxable earnings are up to Rs.5 lakh per annum. But it retained the basic exemption levels unaltered.

Furthermore, individuals would also have expanded their revenue to save tax as a deduction from taxable income available under section 80 C of the Income Tax Act may be raised to Rs.2 lakh from the present limit of Rs.1.5 lakh. The additional 50,000 Rupees of an annual saving window for the investment made in the National Pension Scheme (NPS) will still continue increasing the total savings under Section 80 C to Rs.2.5 lakhs.

The Budget will also remunerate the middle-class by enhancing the ability to purchase their dream home. With respect to this, the tax deduction limit on interest on home loans may be raised to Rs.2.5 lakh a year from the present Rs.2 lakh limit. But this enhanced benefit will come with the withdrawal of deduction for interest on the second house that was allowed earlier.

In addition to it, the lower-income group is also likely to get the return of a scheme similar to the earlier Rajiv Gandhi Equity Savings Scheme. In order to encourage the flow of savings of small investors in the domestic capital market Union Budget in 012-2013 had introduced the RGESS, the tax-saving scheme considering the flow of savings of small investors. The 2019-20 Budget is assumed to re-launch the scheme having a new name and additional parameters.

The government’s welfare standards for every taxpayer and the rural economy are most likely to add further pressure to its finances. This is expected to be considered in the Budget that may reset the fiscal deficiency target for FY20 again to 3.6 percent of GDP from the previous Budget estimate of 3.4 percent. But the roadmap towards fiscal consolidation may be drawn in a way that a 3 percent fiscal deficiency is reached in the following year.

Government finance that is constrained by lower growth in tax collections is expected to be increased in a significant way through disinvestment and higher dividend receipts from the RBI.

The 5G auctions and sale of non-core assets of PSUs including their prized land bank may fill the coffers to the extent that debt may be prevented from moving totally out of hand.

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