NEW DELHI: So, what awaits taxpayers on July 5? Well, going by the promises made in interim
budget, at least the signs look pretty.
Piyush Goyal’s interim budget presented earlier this year in February, had a lot for taxpayers, especially those in lower and middle-income group.
From no tax on income of up to Rs 5 lakh, increasing standard deduction to Rs 50,000, no tax on notional rent and raising the TDS threshold limit, were announced. Besides, to save the Long-Term Capital Gains (LTCG) tax on the sale of house property, taxpayers could invest the gains in two house properties instead of one, as per the announcements of interim budget.
Speaking about the expectations from Nirmala Sitharaman's maiden budget, Homi Mistry, Partner, Deloitte India says, "the interim budget enhanced the tax rebate to ensure that individuals with income up to Rs 5 lakh do not pay any tax. While this was a welcome move, these individuals are still required to file a tax return if their income exceeds Rs 2,50,000. Instead, if the basic exemption limit is enhanced to Rs 5,00,000, these individuals will be absolved from compliance formalities and this will also cater to the expectation of the other taxpayers looking for some tax relief and more money in their pockets. This will also save costs involved in facilitating the filing and processing of such returns where there is no tax contribution to the tax kitty."
"In any case, the basic exemption limit of Rs 2,50,000, was fixed in July 2014 in the first budget of the new government. Since then, there have been no changes in the basic exemption limit. Expectations are therefore rife that the government will once again increase the basic exemption limit (and consequently the slab limits) in this budget," Mistry added.
Corroborating Mistry’s views, Naveen Wadhwa, Deputy General Manager Taxmann Publications, said "Just like every taxpayer, I also wish that Finance Minister increases the maximum exemption limit, deduction under Section 24 and Section 80C. Last time these limits were increased in the year 2014 when NDA government presented its maiden budget. As salaried taxpayers contribute a major portion in tax revenue, I think FM Nirmala Sitharaman should focus more on the salaried. Except Standard deduction and HRA exemption, no exclusive benefit is available to salaried taxpayers."
However, expecting big bang tax concessions may be a little unfair. The government met the fiscal deficit target of 3.4% of GDP for FY19, after sharply cutting spending towards the end of the financial year as revenue fell short of estimates. "Considering the current fiscal deficit, the Finance Minister has to do a balancing act," says Neeru Ahuja, Partner, Deloitte India.
PM Narendra Modi led NDA government introduced a slew of tax reforms after taking over the reins at the centre since 2014. Here's a recap of what taxpayer got from the NDA government in last five years:
Budget 2014
- Personal Income-tax exemption limit raised by Rs 50,000, i.e. from Rs 2 lakh to Rs 2.5 lakh in the case of individual taxpayers, below the age of 60 years. While for senior citizens the limit was raised from Rs 2.5 lakh to Rs 3 lakh.
- Investment limit under Section 80C of the Income-tax Act raised from Rs 1 lakh to Rs 1.5 lakh.
- Deduction limit on account of interest on loan in respect of self-occupied house property raised from Rs 1.5 lakh to Rs 2 lakh.
- Kisan Vikas Patra was reintroduced and National Savings Certificate with insurance cover was launched.
Budget 2015
While presenting his second budget, FM Arun Jaitley said that any concession to taxpayers would impact the country's fiscal health. "Government's
direct tax proposals will result in revenue loss of Rs 8,315 crore, whereas the proposals in indirect taxes are expected to yield Rs 23,383 crore. Thus, the net impact of all tax proposals would be revenue gain of Rs 15,068 crore," Jaitley noted in his budget speech.
Jaitley didn't tinker with the tax slabs, but announced other exemptions for middle class tax-payers.
- Limit of deduction of health insurance premium increased from Rs 15,000 to Rs 25,000, for senior citizens limit increased from Rs 20,000 to Rs 30,000.
- Senior citizens above the age of 80 years, who are not covered by health insurance, to be allowed deduction of Rs 30,000 towards medical expenditures.
- Deduction limit of Rs 60,000 with respect to specified disease of serious nature enhanced to Rs 80,000 in case of senior citizen.
- Additional deduction of Rs 25,000 allowed for differently abled persons.
- To make the NPS more attractive, additional deduction of Rs 50,000 under section 80CCD was announced.
- The transport allowance exemption hiked to Rs 1,600 per month from Rs 800 per month.
- Sukanya Samriddhi Yojana was made tax exempt.
- Surcharge on taxable income exceeding Rs 1 crore was also hiked from 10 per cent to 12 per cent.
Budget 2016
- The ceiling of tax rebate under section 87A was raised from Rs 2,000 to Rs 5,000 to lessen tax burden on individuals with income up to Rs 5 lakhs.
- The limit of deduction of rent paid under section 80GG was also increased from Rs 24,000 per annum to Rs 60,000, to provide relief to those who live in rented houses.
- In another boost to the National Pension Scheme (NPS), withdrawal of up to 40% of the corpus at the time of retirement was made tax exempt.
- Further, service tax on Single premium Annuity (Insurance) Policies was also reduced from 3.5% to 1.4% of the premium paid in certain cases.
- To boost affordable housing, first time home buyers availing home loans of up to Rs 35 lakh in 2016-17, were allowed additional tax benefit of up to Rs 50,000 under Section 80EE of the Income Tax Act, 1961, where house cost does not exceed Rs 50 lakh. This deduction was over and above the existing deduction of Rs 2 lakh under Section 24.
- Surcharge on taxpayers with income exceeding Rs 1 crore was further increased from 12 per cent to 15 per cent.
Budget 2017
- Tax rate for individual assessees with between income of Rs 2.5 lakhs to Rs 5 lakhs, was reduced to 5% from 10%. However, the rebate under Section 87A of the Income-tax Act, 1961 was reduced to Rs 2,500 from the Rs 5,000 for those earning between Rs 2.5 lakh and Rs 3.5 lakh. Earlier, those earning up to Rs 5 lakh were eligible for this rebate.
- The government had also introduced a maximum penalty of Rs. 10,000 for delayed filing of ITR by individuals.
- Further, simplified one-page Income Tax Return (ITR) forms for the category of individuals having taxable income up to Rs 5 lakhs other than business income was announced.
- A surcharge of 10% of tax payable on categories of individuals whose annual taxable income is between Rs 50 lakhs and Rs 1 crore was also introduced.
Budget 2018
Budget 2018 was one of give and take – but it was more take than give, especially for the taxpayer.
So, is there any chance of a cut in tax rates in this budget? According to former chief income-tax commissioner Hardayal Singh, tax rates need to be reduced and rationalised across the board: "GoI may well find it worthwhile to take the risk of further reducing I-T and GST rates. Reduced evasion and avoidance, coupled with improved compliance and a more buoyant economy, may result in revenue gains rather than losses."
"More money in the pockets of taxpayers may boost private consumption, savings and investment. Finance minister Nirmala Sitharaman has her task well cut out," Singh says.