In a major relief for the salaried class, finance minister Piyush Goyal announced full tax exemption for income up to Rs 5 lakh per year. Individuals falling under the said tax slab will get full tax rebate.
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He further added that all the direct tax relief measures will be applicable from April 1 of the current fiscal year.
The government said it will increase the exemption limit for income tax paid by individuals from the current Rs 2.5 lakh to Rs 5 lakh, providing major relief to salaried class. This translates to a benefit of Rs 18,500 crore to more than 3 crore taxpayers.
The finance minister, however, clarified that only those earning up to Rs 5 lakh benefit from the tax relief, adding that the tax threshold limit has not been increased but a tax rebate has been provided in the first slab of Rs 2.5 lakh to Rs 5 lakh.
Those in the higher tax brackets will not get any relief as rebate has gone up, not the tax slab itself, he added.
The tax deducted at source (TDS) limit is also hiked from Rs 10,000 to Rs 40,000 on post-office savings, Goyal said.
Standard deduction has been raised to Rs 50,000 from Rs 40,000. The government also increased the gratuity limit from Rs 10 lakh to Rs 30 lakh. Any person who completes 5 years in an organisation is eligible for gratuity.
The government also announced that it is going to provide income tax relief on notional rent from unsold house extended up to two years. Tax will be levied after two years on the unsold inventory.
Goyal said that there has been a rise of 80 percent in the income tax filers from 2014-2019. The number of tax filers has increased from nearly 3.8 crore in FY14 to 6.85 crore in the current fiscal year.
The direct collections, almost doubled and was reported to be at Rs 12 lakh crore in FY19 from the earlier Rs 6.83 lakh crore in 2014. However, the numbers seem small in a country with a population of 125 crore.
The interim finance minister added in two years, there will be no human interference in tax verification and scrutiny. All returns for tax will be done by a anonymised system via a back office which will be monitored with tax officials without any interference from the tax department, the minister said.