Budget 2021

More money in the hands of the salaried

Shishir Sinha New Delhi | Updated on February 01, 2019

Standard deduction, threshold for TDS on interest raised

Taxpayers with gross income up to ₹6.50 lakh may not be required to pay any income tax if they make investments in provident funds, specified savings schemes and insurance.

In fact, with additional deductions such as interest on home loan up to ₹2 lakh, interest on education loans, National Pension Scheme contributions, medical insurance, medical expenditure on senior citizens, persons with even higher income will not have to pay any tax. An amendment has been proposed in Section 87A of the Income Tax Act. Accordingly, it has been proposed to “increase the maximum amount of tax rebate to ₹12,500 from the existing ₹2,500. The tax rebate shall now be admissible to taxpayers having total income up to ₹5 lakh instead of the existing ₹3.5 lakh.”

The Budget hiked the TDS threshold on interest earned on bank/post office deposits from ₹10,000 to ₹40,000. This will benefit small depositors and non-working spouses. This will help people with no taxable income but who are supposed to file the income tax return in order to get a refund.

Akhil Chandna, Director at Grant Thornton India, said, “Providing a full tax rebate for taxpayers with taxable income up to ₹5 lakh is a masterstroke by the Government, as this benefits 3 crore tax payers without increasing slab rates.”

Archit Gupta, Founder & CEO at ClearTax, however, felt that the ₹5 lakh tax rebate under section 87A may be challenging to implement.

“Most taxpayers can claim this rebate while filing their tax return, since only at the time of filing their tax return will they know how much total income they have earned and the Section 80C deductions they are actually claiming to become eligible for this rebate,” he said.

Published on February 01, 2019

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