As the country is approaching General Elections in few months, a populist budget was always on the cards. The Narendra Modi government has come up with an interesting budget that has focused specially on lower and middle class citizens of the urban sector along with that of the rural sector. As far as personal finance is concerned, the interim budget announced by designated Union Finance Minister Piyush Goyal has remained committed to a welfare budget that has some important announcements which deserve special mention. No doubt, the understanding of budgetary reforms is of great importance considering the direct and indirect taxation systems.
The biggest relief and respite is for the great Indian middle class. As per the budgetary announcement, if annual income of an individual is Rs 5 lakh per annum, then there is no direct tax. But this doesn’t include the scenario when the annual income deductions exceed Rs 5 lakh. The biggest catch is, the income tax rebate limit may actually be considered to be much higher than Rs 5 lakh. A person whose gross income is Rs 9,35,000, who pays housing loan and contributes in PPF or LIC or premium for housing loan along with mediclaim insurance premium, contributes in National Pension Scheme (NPS) and has other interests from banks, may still be within the Rs 5 lakh bracket.
There is an increase in standard deduction from Rs 40,000 to Rs 50,000. Although the tax slabs have not been changed, the salaried class is going to benefit most. The proposed change calling for exemption from notional rent taxation with regard to a second house property is another welcome move. This is a huge relief to taxpayers who migrate to other cities or towns. Added to that, let’s not forget that the threshold of tax deduction at source on interest on fixed deposits with bank or post office has been increased from Rs 10,000 to Rs 40,000. This will be of help for small taxpayers in general.
The raising for gratuity limit from Rs 10 lakh to Rs 30 lakh is indeed welcome for those who are on the verge of retirement. The new pension scheme for employees in the unorganized sector ushers in some sort of stability. Although clarifications are needed regarding the Rs 3000 monthly pension scheme, it underlines a segment which is mostly overlooked at. Nevertheless, from personal finance perspective, the current budget enables a fresh outlook to savings for small taxpayers. Definitely, there is ample scope to save taxes and otherwise, this budget looks to address all strata of people. Although there were expectations regarding change in tax slabs for high tax payers, the Finance Minister is yet to come up with anything specific as such.