Chandan is sceptical of Finance Minister Piyush Goyal's tax "rebate" plan as the Modi government burdens the middle class with welfare schemes in a re-election bid.
Under Section 87A of the Income tax Act, 1961, the rebate has been raised to Rs 12,500 and is only applicable for those with net taxable income of up to Rs 5 lakh.
Archit Gupta, founder and CEO of ClearTax, said that those with income exceeding Rs 5 lakh will pay tax on income between Rs 2.5 lakh and Rs 5 lakh at the rate of 5% as before. For the salaried class of under Rs 5 lakh and above Rs 2.5 lakh, the government has chose to give them tax rebate and not tax exemption as both phenomena are different and altogether effects differently to the pocket of middle man.
Presenting his first interim Budget, finance minister Piyush Goyal went all out to woo farmers by announcing direct income support of Rs 6,000 a year to small farmers with two hectares of land.
Under Section 54 of the Income Tax Act, the rollover benefit can be availed once in a lifetime.
"Persons having gross income up to Rs 6.5 lakh may not be required to pay any income tax if they make investments in provident funds, specified savings, insurance etc.", Mr Goyal said, referring to deduction from taxable income available to the assesse in the form of existing rules.
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The tax Deducted at Source (TDS) threshold has been increased to Rs 40,000 from Rs 10,000. This provision now allows a rebate of Rs 2,500 for those with net taxable income up to Rs 3.5 lakh. The government's total expenditure is estimated to increase 13.3% in 2019-20 from the revised estimates for the current year. Although the convention is that a government facing re-election does not make any major taxation or spending proposals that would tie the hand of the next government, which would present the full Budget subsequently, Goyal's speech laid out a series of appeals and promises to different sections of the electorate. "The slippage is more notable for FY20, to -3.4 per cent vs -3.1 per cent laid out in the roadmap, built on a 11.5 per cent nominal GDP growth projection", said Rao.
Despite high oil prices in 2018-19, petroleum subsidy has actually been reduced by ₹100 crore, tacitly signalling a large amount of the subsidy shifting to the next fiscal year.
While doing so, Goyal allowed the government's commitment to fiscal consolidation to slip further.
Individuals who own up to two self-occupied properties do not have to pay any notional rent tax on them.
For the scheduled tribes also, proposed allocation in 2019-20 BE is Rs 50,086 crore as against Rs 39,135 crore in BE 2018-19, an increase of 28 per cent, the minister said.