Some key things that Budget 2014 has for a common man
Director - Tax & Regulatory Services, EY
There were great expectations from the Modi led NDA Government's maiden Budget. What was finally presented by the Finance Minister Arun Jaitley on 10th July appears to be a reasonably balanced budget which has something for all key sectors and taxpayers, including the common man.
Below are some of the key sops provided to the common man -
Rationalization of Income-tax liability
Increase in the threshold limit from Rs. 2.50 lakh to Rs. 3 lakh for senior citizens and from Rs. 2 lakh to Rs. 2.50 lakh for others.
The burden on the Aam Admi has been eased to some extent, by increasing the minimum threshold limit for taxation from Rs. 2 lakh to Rs. 2.50 lakh. Though some expected this limit to be increased to Rs. 3 lakh, this increase of Rs 50,000 is still welcome as it will still yield a tax saving.
Similarly, the exemption threshold has been increased by Rs. 50,000 for Senior Citizens who are 60 years and above. The minimum slab has been increased from Rs. 2.50 lakh to Rs. 3 lakh, which will provide a greater relief for the senior citizens who are mainly dependent on pension, income from deposits etc. However, no changes have been made in respect of Very Senior citizens (above 80 years).
Incentivizing tax-saving investments and contributions
Increase in the limit towards deduction under section 80C from Rs. 1 lakh to Rs. 1.50 lakh
The FM had indicated his intention to encourage domestic investment in long-term savings with the eventual objective of higher economic growth. With this aim in mind, he has proposed an increase in the limit of exemption for savings under section 80C of the Income-tax Act from Rs. 1 lakh to Rs 1.50 lakh. Correspondingly the overall limit as per section 80CCE stands at Rs 1.50 lakh.
However, the limit towards contributions to pension schemes under Sections 80CCD has been restricted to Rs 1 lakh. Though the increase is only Rs. 50,000, it will benefit a very large population of taxpayers as the deduction covers various items such as employee's contribution to Provident Fund, life insurance premium, and tuition fees for children.
Interest on housing loan
Limit for deduction towards interest on housing loan for self-occupied property increased from Rs. 1.50 lakh to Rs. 2 lakh The deduction towards interest paid towards home loan in respect of a self-occupied house property, has been increased to Rs. 2 lakh from Rs.1.5 lakh to ease the burden to the taxpayers. Given that there has been a significant increase in the housing costs over the years, there was desire from the general public for a significant increase in this limit. However, the FM has increased this by a very nominal amount.
Overall, considering the above amendments, the tax benefit will be approximately Rs 15,450 to Rs 36,050 for an individual (excluding senior citizens) depending upon their income levels/ slab rates.
Public Provident Fund ('PPF')
Enhancement of limit for deposits into PPF account from Rs. 1 lakh to Rs. 1.50 lakh
Individuals can open a PPF account and earn tax-free interest on the contributions, subject to certain conditions. In addition, contribution to PPF is part of the bouquet of items covered under the above mentioned deduction under Section 80C of the Act. By virtue of increase in the limit of deposit into the PPF scheme from Rs. 1 lakh per annum to Rs. 1.50 lakh, two sets of individuals can take advantage of the same.
Firstly, individuals who cannot take advantage of any of the other options under Section 80C can still obtain the enhanced tax deduction by contributing to the PPF scheme. Further, even individuals who have exhausted their tax deduction limit under Section 80C based on other contributions/ payments can still invest the higher amount and avail of the tax-free interest from the PPF account.
Apart from the above major changes brought in the present budget, the FM has also announced minimum pension of Rs. 1000 per month to all subscribers under the Employees' Pension Scheme (EPS).
Finally, Baggage Rules are being amended to raise the free baggage allowance from Rs.35,000 to Rs.45,000. This will facilitate Indian passengers returning after a stay abroad for more than three days who would have otherwise had to pay customs duty on certain goods imported into India.
Overall, the budget is positive for the common man and one will hope that this trend will continue over future budgets of this Government!
(Views expressed are his personal)