This Article is From Jul 10, 2014

Budget 2014: Income Tax Changes Can Save You up to Rs 36,000

Budget 2014: Income Tax Changes Can Save You up to Rs 36,000

Finance Minister Arun Jaitley's Budget announcements will lead to big savings for income tax payers. Mr Jaitley on Thursday hiked the basic exemption limit on income taxes from Rs 2 lakh to Rs 2.50 lakh.

Mr Jaitley also hiked the cap on long-term investments under Section 80C of the Income Tax Act from Rs 1 lakh to Rs 1.50 lakh. The Finance Minister also raised the tax-free cap on interest paid on housing loan from Rs 1.5 lakh to Rs 2 lakh. (Budget 2014: The Big Announcements in 10-Point Cheat-Sheet)

Together, the three announcements will lead to a combined savings of Rs 36,050 for individuals in the highest tax bracket (taxable income above Rs 10 lakh), according to tax consultant BMR Advisors.

Individuals with taxable income between Rs 5 and 10 lakh will save Rs 25,750, BMR Advisors said. Those with taxable income between Rs 2 and Rs 5 lakh will save around Rs 15,450.

In another major announcement, Mr Jaitley enhanced the Public Provident Fund (PPF) ceiling from current Rs 1 lakh to Rs 1.5 lakh in a financial year. PPF is one of the most popular tax-saving schemes. (Read: Finance Minister Arun Jaitley Raises PPF Ceiling to Rs. 1.5 lakh)

The PPF corpus is tax-free at all three stages. The investment is eligible for tax deduction under Section 80C. The interest earned is also tax-free, and so are withdrawals.

Mr Jaitley said the government will forego around Rs 22,000 crore on account of these changes.