Despite the clamour for raising tax exemption limits, investment limits under Section 80C and various tax-exempt allowances, the Finance Minister did not oblige entirely.

Prima facie, one may feel that it’s all status quo. But, first impressions are often wrong impressions.

Many hoped for an encore of the July 2014 Budget that raised by ₹50,000 the tax exemption limit, the Section 80C investment limit and also the interest paid on a home loan for a self-occupied property.

But don’t lose heart. The FM has tweaked many things which should help us save more and save on taxes.

To push us to invest more for our golden years, he has increased the deduction limit on contribution to pension funds and the new pension scheme (NPS) from ₹1 lakh earlier to ₹1.5 lakh. This is covered under the overall Section 80C investment limit of ₹1.5 lakh. But over and above this, the Budget allows an additional deduction of ₹50,000 for contribution to the NPS.

This additional investment of ₹50,000 can save you ₹5,150 in taxes if you are in the 10 per cent tax slab, and ₹10,300 and ₹15,450 if you are in the 20 per cent and 30 per cent tax slabs respectively. Also, the doubling of the transport allowance exemption from ₹800 a month to ₹1,600 a month means a tax saving of about ₹1,000 to ₹3,000 annually, based on your tax slabs.

The FM has also increased the deduction limit on health insurance premium by ₹10,000 to ₹25,000 for those below 60 years and ₹30,000 for those aged 60 or more. This additional ₹10,000 in a health insurance policy will not only get you more health cover, but also tax savings of ₹1,030 to ₹3,090 depending on your tax slab.

For very senior citizens aged 80 years or more who are not covered by health insurance, the Budget provides a tax deduction of ₹30,000 towards medical expenditure; this can save them between ₹3,090 and ₹9,270 in taxes.

Also, very senior citizens get an additional deduction of ₹20,000 on expenditure to treat specified diseases; that’s a further tax break of between ₹2,000 and ₹6,180. Besides, an extra tax deduction of ₹25,000 for differently-abled persons translates into a tax saving of between ₹2,575 and ₹7,725.

More to come

Finally, the service tax exemption on the Varishta Bima Yojana, a Government pension plan, is a boost for senior citizens.

And parents with young daughters should be pleased that all payments including interest payments under the Sukanya Samriddhi Scheme (covered under Section 80C) will be exempt from tax.

The Finance Minister says that taking into account the tax concessions given to middle class tax payers in the July Budget and this Budget, a tax payer will get tax benefit of ₹4,44,200 (see table).

One peeve though is that the expected rationalisation and simplification of tax slabs and rules for individual tax payers did not come through in this Budget.

The FM has promised that individual taxpayers will have a lot more to look forward to when the Government’s fiscal capacity improves.

So, we could see more tax breaks in the next Budget if the economy picks up as expected.

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