On 1st February 2019, there could be Some Increases in Tax Exemption Limit

The upcoming Budget 2019 is a keenly awaited one, for the street is in a guessing game over whether the Narendra Modi Government will go for big bang policy and relief measures, or will it follow the convention of presenting only a vote on account ahead of the general election 2019.

Earlier last week, Arun Jaitley had hinted that the Budget 2019 could include big-ticket announcements that can’t wait, even as it would not be fiscally expansionary. Larger national interest would decide the budget, Jaitley had said via video conferencing from the US.

This is Modi Governments’ fifth and last budget, as the country heads for a Lok Sabha election, presumably sometime in March-April. As a convention, the governments headed for general election do not present a full budget, so as not to leave the next government with a legacy of its proposed expenses and schemes. Instead, such governments present a vote on account - essentially seeking a permit from the Parliament to draw enough money from the exchequer to continue with the work till the remainder of the term. 

The Government is under intense pressure to spur growth, give relief to farmers, ease credit flow to industry - especially small businesses, show job growth, and much more as the election looms. The interim budget that will be presented on February 1 is likely to be positive for middle-class taxpayers. In an interaction with Money control, Home Ministry, Partner, Deloitte India, opined there could be some increases in the tax exemption limit, though too many tax sops are not expected. 

At present, those earning up to Rs 2.50 lakh per annum are exempt from paying tax. Those earning above Rs 2.50 lakh up to Rs 5 lakh pay 5 percent, those earning above Rs 5 lakh to Rs 10 lakh pay 20 percent while those earning above Rs 10 lakh pay 30 percent. 

With respect to deductions allowed for taxation purposes, the Ministry said there could be some tweaks done to ensure more tax savings for the salaried class. Among individuals as well, he said it is likely that senior citizens could be given further tax incentives. 

In terms of long-term capital gains (LTCG) tax, the Ministry said it is unlikely that there will be tweaks in the tax rate. Among individual schemes, the National Pension Scheme (NPS) could also see an increase in the deduction allowed to up to Rs 1 lakh. Now, an additional deduction of up to Rs 50,000 is allowed under the scheme. 

Ministry added that increasing the deduction limit under NPS will make it more attractive. There are also talks of incentives being provided for digital transactions by individuals. It further said that these would be beneficial in boosting electronic transactions and reducing cash-based settlements.