New Delhi: Eyeing the upcoming general elections, the Narendra Modi government on Friday proposed a revision in the exemption limit for individual tax payers. Finance Minister Piyush Goyal in his Budget speech proposed to double the income tax exemption limit for individuals to Rs 5 lakh per year from the current Rs 2.5 lakh but left the implementation of it to the next government.
The income tax slabs, however, will remain the same and this new limit of Rs 5,00,000 will only come into effect from the next financial year.
"An estimated 3 crore tax payers are going to benefit from the proposed revision of the tax slabs," Goyal said. This revised threshold is expected to put an extra burden of Rs 18,500 crore on the exchequer.
According to data, at least 3,53,88,404 individuals had filed declared income below Rs 5 lakh in 2017-18.
The Finance Minister also proposed to raise the standard deduction for salaried employees from the current Rs 40,000 to Rs 50,000 and a full rebate for individual tax payers earning up to Rs 5 lakh per year.
"Individual taxpayers having taxable annual income up to Rs 5 lakh will get full tax rebate and therefore will not be required to pay any income tax. For salaried persons, standard deduction is being raised from the current Rs 40,000 to Rs 50,000. This will provide additional tax benefit of Rs 4,700 crore to more than 3 crore salary earners and pensioners," Goyal said in his speech.
"Reducing the tax burden on middle class has always been our priority ever since our Government took over in 2014," Goyal added.
If an individual invests in the specified tax-saving schemes of the government, the effective tax-free income limit will be Rs 6.5 lakh a year, while it may go further up with additional avenues like NPS, medical insurance and home loan interest payment.