NEW DELHI (TIP): The salaried class has reason to cheer the NDA government’s first Budget. Finance Minister Arun Jaitley has reduced the income tax burden, albeit in a minor way, and put some extra money in the hands of the salaried taxpayer. First, he has increased the basic exemption limit by Rs. 50,000 to Rs. 2.5 lakhs for taxpayers less than 60 years of age. The limit will increase by a like amount for senior citizens from Rs. 2.5 lakh to Rs. 3 lakh. Second, he has increased the tax-free savings limit under Section 80C of the Income Tax Act from Rs. 1 lakh to Rs.1.5 lakh. Those who have bought a new house and are paying an EMI have additional cause to cheer.
The limit for deduction of interest paid on housing loan in the case of self-occupied property has been hiked to Rs. 2 lakh from Rs.1.5 lakh. For taxpayers in the Rs. 5-lakh annual income slab, the savings in tax will be Rs. 10,300 while for someone in the Rs. 10-lakh slab, the tax outgo will be lower by Rs. 21,579, as per calculations by accounting firm EY. The increase in basic exemption limits and under Section 80C have been long-standing demands of taxpayers given that inflation has eroded the value of the current limits.
Analysts, while commending the overdue concessions, point out that Jaitley could have been a little more generous. The Section 80C limit could have been hiked by Rs.1 lakh (as opposed to Rs. 50,000 now) given that the government is keen to divert household savings to financial instruments from physical assets. For those who travel abroad, the Finance Minister has added an additional incentive in the form of a higher baggage allowance which goes up from Rs. 35,000 to Rs. 45,000.