Highlights of Budget Proposal


Today, Hon’ble Finance Minister presented the interim budget. The highlights of the proposal in the context of direct tax are as under

Increase in Standard Deduction for salary

Sec. 16(ia) provides standard deduction of ₹ 40,000 from gross salary income. The proposal is to raised the deduction upto ₹ 50,000 instead of ₹ 40,000

Nil Annual Value for second self occupied house

As per the existing provisions, where an assessee have more than one self-occupied house property, then annual value of one house property (at the choice of the assessee) is considered as nil and notional annual value of other self-occupied house property is subject to tax as deemed to be let-out. It is proposed that annual value of second self-occupied property shall also be considered as nil. Hence, assessee can claim 2 house properties as self-occupied as such. However, aggregate deduction on account of interest on loan for both such self-occupied house properties can not exceed ₹ 2,00,000

Acquisition of 2 houses are eligible for deduction u/s 54

As per sec. 54, assessee is eligible for deduction from long term capital gain on transfer of any long term capital asset being residential house property provided the assessee has acquired one residential house in India subject to certain other conditions.

Now, it is proposed to provide the deduction u/s 54 even assessee acquired two residential house in India provided the amount of the capital gain does not exceed ₹ 2 crores. Further, the benefit of acquisition of 2 house property shall be given once in life time of the assessee.

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Rebate u/s 87A

Where total income of resident individual does not exceed ₹ 3,50,000, then he is eligible for rebate from tax being lower of tax liability or ₹ 2,500.

Now, it is proposed to provide relief upto ₹ 12,500 provided income of the resident individual does not exceed ₹ 5,00,000. In short, if total income of resident individual do not exceed ₹ 5,00,000, then he is not liable to pay any tax.

In case, total income (i.e., income after deduction u/s 80C, 80D, etc.) excceds ₹ 5,00,000, there is no change in tax rate.

It is to be noted in this regard that there is no change in slabs. Resident individual is required to file return of income if his gross total income (i.e., income before deduction u/s 80C, 80D, etc.) exceeds basic exemption limit.

Basic exemption limit are as follow

  • Super Senior Citizen – ₹ 5,00,000
  • Senior Citizen – ₹ 3,00,000
  • Other Individual – ₹ 2,50,000
Increase in threshold limit for TDS in case of interest from bank / PO

In case interest from bank / PO exceeds ₹ 10,000, TDS @ 10% shall be applicable. To get refund of such TDS, assessee is required to file return of income though income of that assessee does not exceed basic exemption limit. It increases compliance burden on that assessee.

In this context, it is proposed that TDS will be deducted by the bank / PO only if interest income exceeds ₹ 40,000

Increase in threshold limit for TDS in case of rent

Similarly, threshold limit for TDS is proposed to be increased to ₹ 2,40,000 from existing limit of ₹ 1,80,000

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