Union Minister Piyush Goyal on Friday announced a slew of changes in tax rules, from a full rebate on personal income up to Rs. 5 lakh in a year to a 25 per cent hike in standard deduction threshold. “This is not just an interim budget, this is a vehicle for the developmental transformation of the nation,” said Mr Goyal, who was given the additional charge of finance last month. The government proposed a full tax rebate to individuals with income up to Rs. 5 lakh in a year, a move that would cost the government Rs. 18,500 crore. Union Minister Arun Jaitley, who is in the US for medical treatment, said that the budget is aimed at benefiting the “great Indian middle class”.
Here are key takeaways from the income tax changes proposed in budget:
“Straight” income tax rebate of Rs. 12,500
The government proposed to provide a full rebate to individuals with an annual income up to Rs. 5 lakh. However, the income tax slabs applicable to other individuals remain the same.
Mr Jaitley wrote in a post on social media that the decision to exempt income of up to Rs. 5 lakh from tax will benefit the “great Indian middle class”. The move will strengthen the purchasing power of the middle class which holds the key for the country’s future, he said.
As per the existing income tax rules, applicable till Assessment Year 2019-20, annual personal income up to Rs. 2.5 lakh is exempt from income tax. Section 87A of the Income Tax Act provides for a rebate to individuals on income up to a certain limit.
The Income Tax Department will give a “straight rebate” of Rs. 12,500 to people having an annual income of Rs. 5 lakh from the beginning of next fiscal year, Central Board of Direct Taxes (CBDT) Chairman Sushil Chandra said. Therefore, their tax liability will become nil, he explained.
For people earning more than Rs. 5 lakh annually, the “old” tax rates will continue, said the chief of CBDT, the apex policymaking body of the taxman.
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