The standard deduction limit has been increased to Rs 50,000 in the interim budget, as has the TDS limit on bank and post office deposits.
New Delhi: Finance Minister Piyush Goyal announced a series of tax sops for the middle-class, including providing full tax rebate for income up to Rs 5 lakh. This is expected to benefit three crore taxpayers.
All individual taxpayers having a taxable income of up to Rs 5 lakh will not have to pay tax. This will have a tax impact of Rs 18,000 crore.
Goyal also announced an increase in the standard deduction limit to Rs 50,000 from Rs 40,000. The government also increased the limit on tax deducted at source on bank and post office deposits to Rs 50,000 from Rs 10,000.
Economists expect the measure to free up income in the hands of the people, providing a major consumption boost to the economy.
Reducing middle-class tax burden
This is the first time such major changes have been made in the direct tax structure in an interim budget, as the Modi government looks to woo a politically crucial voter base ahead of the national elections due in April-Mahy.
“Reducing middle-class tax burden has been a priority of the government,” Goyal said, adding that India has managed to move to a moderate-taxation-but-high-compliance regime through a series of reform measures.
“Some of these benefits of the tax reforms must be passed to the middle-class tax payers,” he said before announcing the sops.
Benefits for two houses
The finance minister also announced an exemption on notional rent on a second house and allowed rollover of capital gains that will permit investment in two residential houses as against the current one residential house.
Further, the TDS requirement on rent has been increased to Rs 2,40,000 from Rs 1,80,000.