Depositors have been given some relief in the Union Budget 2019, which proposed to increase the TDS threshold on interest earned on the deposits with banks and post office to Rs 40,000. The Budget tabled before the Parliament on Friday calls for quadrupling the TDS limit on interest from deposits from Rs 10,000 to Rs 40,000. In case of senior citizens, the limit has been increased to Rs 50,000. The proposal will cover interest earned on savings deposits, fixed deposits, as well as other deposit schemes in banks and post offices.
"TDS threshold on interest earned on bank and post office deposits is being raised from Rs 10,000 to Rs 40,000. This will benefit small depositors and non-working spouses," Interim Finance Minister Piyush Goyal said during his Budget speech today.
As per the existing norms for Tax Deducted at Source, or TDS, banks and post office are allowed a 10 per cent deduction if the interest earned from a savings account exceeds Rs 10,000 in a single financial year. This, however, does not provide any relief to the depositor in terms of tax on income from interest.
Taxpayers still have to declare this interest income under income from other sources in their Income Tax Returns, despite paying TDS for it. They have to claim it back as deduction from gross total income under Section 80TTA of the Income Tax Act.
Furthermore, Goyal proposed in his Budget speech to increase the TDS threshold for deduction of tax on rent from Rs 1.80 lakh to Rs 2.40 lakh for providing relief to small taxpayers.
Goyal also announced a tax rebate on the income up to Rs 5 lakh and raised standard deduction for salaried persons from 40,000 to Rs 50,000.
"Individual taxpayers having taxable annual income up to Rs 5 lakh will get full tax rebate and therefore will not be required to pay any income tax. As a result, even persons having gross income up to Rs 6.50 lakh may not be required to pay any income tax if they make investments in provident funds, specified savings, insurance etc," Goyal said.