Major Relief to Income Tax is expected in upcoming Budget – FM, Arun Jaitley

arun-jaitley-ptiFinance Minister Arun Jaitley recently said that the government, at some stage, will make taxes, both direct and indirect, more reasonable. His statement comes post demonetisation at a time when digital push is being given to financial transactions.

The FM hinted at tax cuts in the future as higher revenue gets generated by a cashless system that will allow transactions to be tracked, following the November 8 demonetisation announcement. “Future transactions would be substantially digital and once they are substantially digital, they get caught in the tax net. Therefore, the future taxation level (collection) would be much higher than what is currently being collected,” he said.

A look at current I-T slabs

*Individual taxpayers (Tax rate/Relief as per Budget 2016)
Up to Rs 2,50,000 – NIL / NIL
Rs 2,50,001 to Rs 5,00,000 – 10% / Rs 5,000 (Savings increased from Rs 2,000)
Rs 5,00,001 to Rs 10,00,000 – 20% / NIL
Rs 10,00,001 to Rs 1 crore – 30% / NIL
Above Rs 1 crore – 30% / 15% surcharge (Increased from 12%)

*Senior citizens (60 years and above, but less than 80 years) (Tax rate/Relief as per Budget 2016)
Up to Rs 3,00,000 – NIL / NIL
Rs 3,00,001 to Rs 5,00,000 – 10% / Rs 5,000 (Savings increased from Rs 2,000)
Rs 5,00,001 to Rs 10,00,000 – 20% / NIL
Rs 10,00,001 to Rs 1 crore – 30% / NIL
Above Rs 1 crore – 30% / 15% surcharge (Increased from 12%)

*Senior citizens (80 years and above) (Tax rate/Relief as per Budget 2016)
Up to Rs 5,00,000 – NIL / Rs 5,000 (Savings increased from Rs 2,000)
Rs 5,00,001 to Rs 10,00,000 – 20% / NIL
Rs 10,00,001 to Rs 1 crore – 30% / NIL
For income above Rs 1 crore – 30% / 15% surcharge (Increased from 12%)

Other measures proposed by Budget 2016

Increase in tax rebate: Those earning below Rs 5 lakh to save an additional Rs 3,000 in taxes. Tax rebate under Section 87A raised from Rs 2,000 to Rs 5,000. Effectively, this means the basic exemption now is of Rs 3 lakh.

Home loans: First home buyers to get additional deduction of Rs 50,000. However, this benefit is only for loans up to Rs 35 lakh where the cost of house is less than Rs 50 lakh.

Pension schemes: Withdrawal from NPS corpus of up to 40% at the time of retirement has been made tax exempt. Similarly, in case of superannuation funds and recognised provident funds, including EPF, the same norm of 40% of corpus to be tax free will apply in respect of corpus created out of contributions made after April 1, 2016. Further, the annuity fund, which goes to the legal heir after the death of pensioner, will not be taxable in all three cases. The FM has also reduced the service tax on Single premium Annuity (Insurance) Policies from 3.5% to 1.4% of the premium paid.

Deduction of rent: Increase in the limit of deduction of rent paid under Section 80GG, from Rs 24,000 per annum to Rs 60,000 p.a., to provide relief to those who live in rented houses.

Source: Economic Times

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