On Saturday, Finance Minister Arun Jaitley released the Union Budget. He did not tinker with the personal tax rates and the income slabs. However, there are a few deductions / exemptions which would interest the tax payer.
Income Tax
- No change in the tax slabs for individuals.
- Wealth tax has been abolished.
Income Tax Relief
The finance minister stated that the individual tax payer’s relief would be to the tune of Rs 4,44,200.
That break up would be:
- Rs 1,50,000. Deduction under Section 80C.
- Rs 2,00,000. Deduction on account of interest paid on a home loan.
- Rs 25,000. Deduction under Section 80D which refers to premium paid for health insurance.
- Rs 19,200. Transport allowance.
- Rs 50,000. Deduction under Section 80CCD. This refers to investments in the National Pension Scheme, or NPS.
Besides the additional deduction of Rs 50,000 for investments in the NPS, employees have the option of opting for either the EPF or the NPS. For employees below a certain threshold of monthly income, contribution to EPF should be optional, without affecting or reducing the employer’s contribution.
Health Insurance
Taxpayers will be able to claim higher deductions on account of premium paid on health insurance.
The finance minister proposed to increase the limit of deduction on health insurance premium from Rs 15,000 to Rs 25,000.
For senior citizens this limit is to be increased from Rs 20,000 to Rs 30,000. Those above the age of 80 years -- who are not eligible to avail of health insurance -- deduction will be allowed for medical expenses up to Rs 30,000. The deduction limit of Rs 60,000 on expenditure on account of specified diseases will be enhanced to Rs 80,000 in the case of senior citizens.
In the case of differently-abled persons, the deduction limit has been proposed to shift from Rs 50,000 to Rs 75,000.
Investments
- To encourage financial savings and attract investors going for gold, sovereign gold bonds are positioned as an alternative.
- Reintroduction of tax-free bonds.
- Sukanya Samriddhi Scheme is a new entrant in the small-savings schemes category aimed at encouraging savings for a girl child's education and marriage. It was launched this year. Investments in the scheme are eligible for deduction under Section 80C. In his Budget speech, the financial minister stated that even the interest earned shall be tax free.
- Much more clarity was offered in respect of Real Estate Investment Trusts, or REITs, and Infrastructure Investment Trusts, or INViTs.
- Foreign investors have been allowed to invest in alternate investment funds, or AIFs – a privately pooled investment fund for real estate, private equity and hedge funds. Such funds will also be given a tax ‘pass through’ status which will allow the tax liability to be passed on from the fund to the end-investor.
