From a hike in tax rebate on income to an increase in standard deduction, the government announced some key income tax changes in Budget 2019. While keeping the income tax slabs unchanged, Union Minister Piyush Goyal proposed a full tax rebate on annual personal income up to Rs 5 lakh. He also announced an increase in standard deduction limit for salaried individuals to Rs 50,000, from Rs 40,000. The raise in standard deduction limit, he said, would provide an additional tax benefit of Rs 4,700 crore to more than three crore salary earners and pensioners. (Read full budget speech here)
Here are some of the key income tax changes announced in Budget 2019:
Income tax rebate
The interim Budget 2019 proposes a full tax rebate for individuals with an annual income up to Rs 5 lakh. Not to be confused with income tax exemption, this tax rebate is applicable to those with annual income up to Rs 5 lakh, say tax experts.
In other words, a person having annual taxable income up to Rs 5 lakh in a year will not be required to pay any income tax.
"As a result, even persons having gross income up to Rs 6.50 lakh may not be required to pay any income tax if they make investments in provident funds, specified savings, insurance etc.," said Mr Goyal.
"In fact, with additional deductions such as interest on home loan up to Rs 2 lakh, interest on education loans, National Pension Scheme contributions, medical insurance, medical expenditure on senior citizens etc., persons having even higher income will not have to pay any tax."
The government proposed to increase the standard deduction limit by 25 per cent to Rs 50,000. This means that in Assessment Year 2020-21, a fixed deduction of Rs 50,000 in taxable income will be applicable to employees and pensioners.
The standard deduction of Rs. 40,000 was proposed in Budget 2018, replacing the existing deductions of Rs. 19,200 and Rs. 15,000 for transport allowance and medical reimbursement respectively.
In the Budget, the government also proposed to hike the TDS (tax deducted at source) threshold applicable to interest earned on bank/post office deposits. Announcing a four-fold increase in the TDS to Rs 40,000, the government said the move will benefit small depositors and non-working spouses.
In other words, this means interest income from deposits in a bank or post office will be paid without any deduction up to Rs 40,000. Among other TDS changes, the government proposed to increase the threshold for deduction of tax on rent to Rs 2,40,000 from Rs 1,80,000.