The Narendra Modi government’s first full-year budget was a disappointment for the salaried middle-class individual with neither an increase in the minimum taxable limit nor reduction in personal tax rates. Instead it offered marginal benefits by increasing exemption limits for premium payments on health insurance and additional exemption for contribution towards national pension scheme.
For an individual tax payer, what is new in terms of deductions is the increase in the health insurance premium under section 80 D to Rs. 25,000 from Rs.15,000 and increase in transport allowance to Rs. 19,200 per annum from Rs. 9,600 per annum. Also there is an additional exemption of Rs. 50,000 under 80CCD towards contribution towards national pension scheme.
Going by the past statements made by Finance Minister Arun Jaitley on personal taxes, there was an expectation that the current minimum taxable limit would be raised from Rs. 2.5 lakh, in order to leave more money in the hands of the middle class and boost spending. Instead, Mr. Jaitley focused on increasing the tax exemptions on premium payment towards health insurance and contribution towards pension, among others.
In his budget speech, Mr. Jaitley said that concession to individual tax-payers was given despite inadequate fiscal space. “Lot to look forward to as fiscal capacity improves,” he added.
“The foremost expectation of every taxpayer is realignment or increase in the tax exemption limit. In that sense, it is a disappointment,” said Amarpal S Chadha, Partner, Tax & Regulatory Services, EY India.
“There was also a great expectation from this budget, starting with support to incentivise affordable housing and permit higher tax exemption limits on interest and principal repayments for home buyers. There has been no proposal towards increase in relief to the tax payer towards interest payment on housing loans,” he added.
For senior citizens, the medical premium limit was increased to Rs. 30,000 from Rs. 20,000. Meanwhile, for very senior citizens (80 years) not covered under medical insurance, a deduction of up to Rs. 30,000 towards medical expenditure is allowed.
“The aggregate deduction available to any individual in respect of health insurance premium and the medical expenditure incurred would however be limited to Rs. 30,000,” according to Suresh Surana, Founder of RSM Astute Consulting Group.
The tax deduction limit under section 80C for individuals, which provides deduction in respect of investment in saving instruments such as Provident Fund, Equity Linked Savings Scheme life insurance premium, housing loan repayment, National Savings Scheme, was left unchanged at Rs. 1.5 lakh.
Mr. Jaitley said that through the exemptions individual tax payers get to gain Rs. 4.4 lakh.
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