New Delhi: Former Defence Minister and the acting Finance Minister of India Nirmala Sitharaman is all set to start a new inning in her career. She will be presenting the first Budget of the second term of the Modi government on July 5.
The first tenure of Modi Government announced some tax relief in the interim Budget in February, there are expectations that the finance minister may announce some more relief on the income tax front on Friday but not much.
Many analysts expect the budget to be pro-growth and tax sops will add stimulus to an economy that has slowed sharply this year.
1) Higher income tax exemption limit:
The Finance Minister may raise the tax exemption limit for individuals to Rs. 3 lakh of their annual income, up from the current Rs. 2.5 lakh as per reports.
In 2014, right after the NDA dispensation won an overwhelming mandate in the Lok Sabha elections, Arun Jaitley in his first Union Budget had raised personal income tax exemption limit from Rs. 2 lakh to Rs 2.5 lakh.
2) More income tax relief on NPS withdrawal:
In December last year, the government had raised the tax exemption limit for lump sum withdrawal on exit from NPS to 60%. With this, the entire withdrawal will be exempt from income tax. Currently, out of 60% of the accumulated corpus withdrawn by NPS subscribers at the time of retirement or reaching the age of 60, 40% is tax exempt and balance 20% is taxable. 40% of the total accumulated corpus utilized for the purchase of an annuity is already tax exempted.
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If this change is notified, NPS will get the exempt, exempt and exempt or EEE status, which means that like PPF (public provident fund) or EPF (employee provident fund) investment at the investment stage, accumulation and withdrawal stage will be tax-free.
3) Higher Section 80C Deduction Limit:
As per reports, the Finance Ministry is also looking at raising the tax exemption limit for savings and investments made under the Section 80C of the Income Tax law. Currently, the limit is set is Rs 1.5 lakh.
4) Re-introduction of tax-free bonds:
The 2019-20 Budget may see the re-introduction of tax-free bonds to raise capital by government entities for infrastructure projects. These bonds are called tax free because the interest earned is not taxed. The tax-free bonds generally have a long-term maturity of typically ten years or more. The National Highway Authority of India (NHAI) could be an immediate beneficiary, given the government thrust on road projects.
5) Higher LTCG limit:
The government may consider increasing the threshold limit of LTCG (long-term capital gains) on sale of listed equity shares and units of equity-oriented mutual funds which are currently pegged at Rs. 1 lakh per financial year, says Poorva Prakash, senior director at Deloitte Haskins and Sells LLP. In the Finance Act, 2018, changes were made under capital gains taxation regime wherein tax was levied on long-term capital gains (LTCG) exceeding Rs 1 lakh from the sale of listed equity shares and units of equity-oriented mutual funds, which were fully exempt previously.