In a massive boost for the middle-class tax payers of the country, stand-in Finance Minister Piyush Goyal during the interim budget 2019 speech stated that his NDA government has proposed that those earning up to Rs 5 lakh per annum will be exempted from paying income tax.
It has been proposed that in the Union budget, there shall be full tax rebate for any individual earning Rs 5 lakh yearly, meaning they won't be needed to pay income tax.
"While for the present, the existing rates for income tax will continue for FY 19-20, I propose the following changes. Individual tax payers having taxable income up to Rs 5 lakhs will get full tax rebate. Therefore, they will not be required to pay any tax," Piyush Goyal said.
Earlier, individuals earning up to Rs 2.5 lakh annually, and senior citizens earning up to Rs 3 lakhs annually, were exempted from tax. With this proposal, the government has doubled the tax exemption limit.
Further, all those who earn Rs 6.5 lakhs per annum may also get their full tax exempted if they have made saving investments, and even the individuals with higher income may be exempted.
"As a result, even people will grossed income of up to Rs 6.5 lakhs may not be required to pay any income tax if they make investments in specified savings, insurance etc. In fact, with additional deductions, such as interest of home loans up to Rs 2 lakh, interest on educational loan, medical insurance. With all of these deductions, persons having even higher income will not have to pay any tax. This will provide tax benefit for Rs 18,500 to an estimated 3 crore middle class tax payers," the interim FM added.
Standard tax deduction for the salaried persons would be raised from Rs 40,000 to Rs 50,000. It will provide additional tax benefit of Rs 4700 crore to more than 3 crore salaried earners and pensioners, Piyush Goyal mentioned.
Also, the interim FM announced during his budget speech that the gratuity limit, which was earlier at Rs 10 lakhs, will be increased to Rs 30 lakhs.