Finance minister Arun Jaitley has given reasons for individual tax payers to smile in his first Budget on Thursday as he raised the exemption limit of income tax from Rs 2 lakh to Rs 2.5 lakh for all individual tax payers below 60 years.
For senior citizens up to 80 years, the exemption limit has gone up from Rs 2.5 lakh to Rs 3 lakh. There is no change in the exemption limit for senior citizens above 80 years.
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He further raised the income tax deduction limit on investments in Section 80C instruments from Rs 1 lakh to Rs 1.5 lakh. This was one of the long-pending demands of the investment communities.
Under Section 80 C of the Income Tax Act, one can claim deduction from taxable income if one invests in Public Provident Fund (PPF), Employee Provident Fund (EPF), National Savings Certificate (NSC), life insurance policies, tax-saving bank fixed deposits, Senior Citizen Savings Schemes, tax-saving mutual funds and to repay home loan principal.
"The increase in basic exemption limit from Rs 2 lakh to Rs 2.5 lakh will benefit all the individuals. The increase deduction under Section 80C from Rs 1 lakh to Rs 1.5 lakh will help achieve twin objectives of encouraging the households to make long term savings, and also increase the overall savings rate in the economy which has fallen considerably over the last five years," says Vikas Vasal, Partner, Tax, KPMG in India.
The Budget also gave a major relief to home loan borrowers as it raised the deduction limit on interest paid on home loans for self-occupied properties from Rs 1.5 lakh to Rs 2 lakh.
As a result of these changes, a taxpayer in the 30% tax slab can save up to Rs 36,050 a year, in the 20% tax slab can save up to Rs 25,750 and those in the 10% tax slab can save up to Rs 17,510.
"Given the rising costs of property and interest, a deduction of Rs 1.5 lakh on interest payments is insufficient. The Budget has proposed increasing the relief of housing loan interest from Rs 1.5 lakh to Rs 2 lakh for self-occupied house property is therefore a welcome move," says Tapati Ghose,Partner, Deloitte Haskins & Sells.
The finance minister has, however, not given relief to those with annual income of more than Rs 1 crore as the 10% surcharge levied by the UPA government in last years budget will continue.