- February 5, 2019
- Category: Tax Planning
How do the budget proposals impact the common man?
Tax Rebate up to Rs.5 lakh taxable income: For individual tax payers having annual taxable income up to Rs.5 lakh (after availing deductions), the Budget has proposed full rebate of Rs.12,500. So, if the total tax payable is lower than or equal to Rs.12,500, then there will no tax payable on the income. This is going to immensely benefit the tax payers in the lowest tax slab.
Here you can see, for an individual below 60 years, after availing all the deductions, his taxable income is reduced to below Rs.5 lakh.
Standard Deduction limit raised: Earlier, tax payers claimed medical and transport allowance up to a limit by submitting the respective bills every year. In the 2018 Budget, the standard deduction was reintroduced again with a maximum limit of Rs.40,000 in lieu of such allowances. This limit has been increased to Rs.50,000 in the 2019 Budget.
TDS limit raised: Taking into account inflation and the general rise in income levels of people over the last decade, the TDS threshold on interest earned on bank and post office deposits is being raised from Rs.10,000 to Rs.40,000. This means that if your total interest income in a year is under Rs.40,000, the bank will not deduct TDS and you need not fill up Form 15G/15H. But note that no TDS applicable does not mean no tax liability. If you fall under the taxable bracket, you need to pay self-assessment tax.
No tax on notional rent of 2nd house property: Earlier, if an individual had 2 houses, then apart from the self-occupied property, the second home (even if vacant) was deemed to be let out. The individual was then liable to pay tax on notional rental income. Now, the individual need not pay tax on another house. However, if he has 3 house properties, then any 2 will be considered self-occupied on which he will not pay tax but he will have to pay tax on the third one as it will be considered let out property.
Capital gains benefit extended to 2 house properties: As per the current tax laws, an individual can save tax on long term capital gains of house property by investing in another house property or by constructing another house or by investing in the gains in 54EC capital gains bonds. Now, Budget 2019 has proposed to increase the benefit of long-term capital gains to two residential houses. This implies that an individual can save on long term capital gains tax by investing in two house properties instead of one currently. However, an individual can avail this benefit only if capital gains from sale of house property does not exceed Rs.2 crore and can be availed once in a lifetime.