The Union Budget is once again on the anvil, only this time around it will be an interim budget, seeing as the elections will follow later this year. Expectations are rife from the Union Budget for 2019 with several experts anticipating housing loan and income tax rebates and other benefits. Although interim budgets are perceived as those without any major schemes in order to keep the financial burden lighter on the next Government, the Union Finance Minister is expected to come up with benefits that will cater to various sections of society.
CII, the leading industry chamber, has stated that the income tax exemption threshold should be doubled to a sum of Rs. 5 lakh as per reports. Additionally, it has also called for an increase in the deduction threshold for Section 80C as part of the Union Budget 2019. This will help people save more taxes on their investments including home loan principal repayment. The industry body has also stated that those earning between RS. 5-10 lakh should have to pay taxes at a comparatively lower 10% rate in order to lower the burden on the middle class. CII has also requested the Government to increase the deduction limit to Rs. 2.5. lakh under Section 80C which will definitely work as an incentive for more savings.
The CII has also sent other recommendations to the Union Finance Ministry, whereby it has suggested that the highest income tax slab should be brought down to 25% as opposed to 30% currently with exemptions for transport allowance and medical expenditure. Income below Rs. 5 lakh should be exempted while incomes between Rs. 5-10 lakh should come with tax rates of 10%. For those with income between Rs. 10-20 lakh, 20% should be the tax rate and those earning more than Rs. 20 lakh should pay taxes at 25% as per the CII recommendations.
Exemptions may be there for transport allowance and medical expenditure in tandem with Rs. 40, 000 as the standard deduction. Both these provisions were subsumed within the standard deduction introduced in the last Union Budget. The Government may also consider increasing standard deduction to Rs. 75, 000. Other experts feel that CII’s recommendations may be viewed seriously by the Government in an election year and the average taxpayer will greatly benefit in case these recommendations are implemented in one form or the other. Some experts feel that there will be considerable rebates on the anvil for smaller taxpayers in the 2019 Union Budget since just 10% of the entire tax collections comes from people whose income is reported to be above Rs. 10 lakh or even below.
The Government did not change the individual tax slabs in the Union Budget and direct tax collections have not gone up in the present year. This reinstates the belief in the fact that tax rates which are moderate will automatically lead to compliance going up. As a result, the average taxpayer can expect some relief in rates of taxation for personal taxpayers. The Government brought in standard deduction for taxpayers last year in case of salaried professionals while multiple exemptions were withdrawn. Overall, salaried professionals did not enjoy any major relief from taxation.
Experts feel that the Government may offer some relief by increasing the exemption threshold to Rs. 5 lakh. There could be some relaxation under Section 80C that will be exceeding Rs. 1.5 lakh as per these experts. The tax slabs may be tweaked as well with those earning between Rs. 5-10 lakh possibly benefiting from lower rates of taxation. There are huge expectations of average taxpayers on both fronts and the Union Government may decide to go ahead with these measures. The interim budget is expected to be announced on the 1st of February, 2019.
Over the last four years, the taxation structure has been simplified to an extent. The exemption limit for income tax has been increased to Rs. 2.5 lakh for those up to 60 years from Rs. 2 lakh. The income tax has been lowered to 5% for those earning between Rs. 2.5 lakh and Rs. 5 lakh. Both changes equate to tax savings of Rs. 17, 500. Senior citizens are exempted from taxation on income up to Rs. 3 lakh and their next slab is Rs. 3-5 lakh on which taxation has been lowered to 5% from 10% previously. This will help senior citizens save Rs. 15, 000 as per estimates. Super senior citizens do not have to adhere to changed slabs. These are individuals above 80 years of age and their income is exempted from taxes up to Rs. 5 lakh.
An education cess and secondary and higher education cess of 2% and 1% respectively were imposed on customers and this was increased by 1% in the Union Budget for 2018 with both cess components amalgamated into the 4% health and education cess. A surcharge of 10% was previously imposed on people with incomes above Rs. 1 crore. Yet, currently, those earning above Rs. 50 lakh have to bear this 10% surcharge burden. Those earning more than Rs. 1 crore will have to shell out 15% as surcharge.
The income on which rebate can be claimed under Section 87A has been lowered to Rs. 3.5 lakh from Rs. 5 lakh. The rebate amount has gone up to Rs. 2, 500 from Rs. 2, 000. Standard deduction was brought in for AY2019-20 of Rs. 40, 000, subsuming medical reimbursement and transport allowance of Rs. 15, 000 and Rs. 19, 200 respectively. Those in the 5% tax slab will save Rs. 290 while those in the 20% category will save Rs. 1, 160. Those in the 30% tax category will save Rs. 1, 740. The interest paid on home loans was increased to Rs. 2 lakh in AY2014-15 from Rs. 1.5 lakh previously and is Rs. 3 lakh for senior citizens. There is an added deduction of Rs. 50, 000 on interest in case of first-time homebuyers purchasing homes which are valued up to Rs. 50 lakh and the loan amount is up to Rs. 35 lakh. Deduction up to Rs. 25, 000 can be claimed on health insurance premium payments under Section 80D as compared to Rs. 15, 000 previously. Also, this is Rs. 50, 000 for people above the age of 60. Those investing in NPS (National Pension Scheme) including the employees and also subscribers can get tax deductions up to Rs. 1.5 lakh.