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Budget 2019: No tax relief for middle class, super rich to be taxed even more!

Union Budget 2019: Finance Minister Nirmala Sitharaman left the salaried class disappointed in her maiden budget. Not only were key demands like a higher tax exemption threshold and rationalisation of tax slab not met, she has proposed a higher surcharge on those earning above Rs 2 crore

twitter-logo BusinessToday.In   New Delhi     Last Updated: July 5, 2019  | 16:09 IST
Budget 2019: No tax relief for middle class, super rich to be taxed even more!
Union Budget 2019: The highlight of the budget is the higher tax on the super rich. From the perspective of resource mobilisation and social justice this cannot be faulted.

India's upper middle class has been waiting for a tax break for a long time, and Finance Minister Nirmala Sitharaman left them disappointed in Budget 2019 too. She has ignored key demands of the common man as well as industry bodies, be it raising the tax exemption threshold from the current Rs 2.50 lakh or revising the tax slabs or increasing the maximum deduction limit under Section 80C from Rs 1.5 lakh. Instead, the higher income groups are staring at a higher tax outgo.

Saying that those who earn more should also contribute more, Sitharaman announced higher surcharges on individuals with taxable income of over Rs 2 crore. For individuals in the income bracket of Rs 2-5 crore, the applicable surcharge will be 3 per cent while those earning above Rs 5 crore are looking at a surcharge of 7 per cent. For other categories of income payers, the tax rates and slabs remain unchanged.

The lower middle class looking to buy a house, however, has much to cheer. Sitharaman announced an additional deduction of Rs 1.5 lakh on interest on home loans borrowed under affordable housing till March 2020. The tax deduction limit for interest on housing loans was previously Rs 2 lakh. In other words, the amount that can now be claimed as a deduction from a homebuyer's total income is capped at Rs 3.5 lakh, which should encourage the fence-sitters to finally buy a house.

The lower middle class also had much to cheer in Budget 2017 - when former Finance Minister Arun Jaitley reduced the personal income tax in the Rs 2.5-5 lakh bracket to 5 per cent from 10 per cent - and again in the Interim Budget 2019 thanks to the full tax rebate offered to individuals with taxable annual income up to Rs 5 lakh.

But those in the Rs 5-8 lakh slab have been stuck paying 20 per cent tax since 2010-11. The upper threshold for this rate was subsequently pushed up to Rs 10 lakh for FY13, but experts have long pushed for further rationalisation given the steep jump between the first two tax brackets.

Here's a look at the current income tax slabs for individuals under 60 years of age:


FULL COVERAGE:  Union Budget 2019

In addition:

10% surcharge is applicable if income exceeds Rs 50 lakh, up to Rs 1 crore

15% surcharge is applicable on income tax if income exceeds Rs 1 crore

New surcharges on incomes above Rs 2 crore

This means that a person with an annual income of Rs 10 lakh, who maximises his Section 80C deduction limit and avails of Rs 1 lakh HRA, will pay Rs 54,600 as income tax in the current assesment year, including the health and education cess. Similarly, those eaning Rs 15 lakh a year who manage to bring down their gross taxable income to Rs 11.50 lakh will have to cough up total tax of Rs 1,63,800. The tax structure for senior citizens in the 60-80 year bracket is slightly different because income up to Rs 3 lakh incurs zero tax while for very senior citizens above 80 years of age, the ceiling is at Rs 5 lakh. However, those in the Rs 5-10 lakh bracket as well as the highest slab continue to incur a tax rate of 20 per cent and 30 per cent, respectively.

"The highlight of the budget is the higher tax on the super rich. From the perspective of resource mobilisation and social justice this cannot be faulted.But it has to be acknowledged that the tax incidence rising to 42 percent on the super rich is very sharp," said VK Vijayakumar, Chief Investment Strategist at Geojit Financial Services.

Also read: Budget 2019: Tax relief on auto loan! EVs to fetch Rs 1.5 lakh income tax exemption

Also read: Union Budget 2019: Women find special mention in Nirmala Sitharaman's budget speech

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