What budget 2019 can do to reduce your tax burden?
Interim Budget 2019 could offer individual taxpayers certain benefits and tax exemptions, which will have a positive impact on personal savings, retirement benefits,financial planning and buying power. Corporate India would like to see parity and some clarity
FOR INDIVIDUAL TAXPAYER
1. Revisiting Tax-Free Ceiling Limit
Interim budgets are not typically known for significant amendments, however this time proposals to keep up old promises may be introduced. While the government would want to maintain the balance between growth and revenue, it may consider increasing the tax -free ceiling limit for individuals.
2. Raising the limit under Section 80C
Interim budget may increase deduction limit under Section 80C to Rs 2.5 lakh from Rs 1.5 lakh at present.
3. Reintroducing medical reimbursement and transport allowance
In the 2018 Budget, Standard Deduction of Rs 40,000 was introduced at the cost of transport allowance and medical reimbursement to provide relief to taxpayers in terms of tax savings. However, the increase in health and education cess (erstwhile education cess) from 3% to 4% takes away some of the benefits arising from the standard deduction. In its pre-budget recommendation, the Confederation of Indian Industry has also suggested to re-introduce the exemption for medical reimbursement and transport allowance.
4. Making NPS more attractive as an investment option
The Union Cabinet has in its meeting dated December 6, 2018 approved the proposal of exempting the lump sum withdrawal of 60% on exit. With this, the 60% lump sum withdrawal and commuted 40% will now be exempt from income tax. In the interim budget, there could be a special mention of the proposed change, which makes NPS comparable with PPF and EPF.
FOR CORPORATE TAXPAYER
1. Interim budget may consider LLPs and Partnerships for concessional tax rates like companies
Various tax concessions /benefits have been phased out for companies as well as for LLPs and partnership firms. Though medium and small companies have been compensated by reduction of corporation tax rate to 25%, the applicable tax rate for LLP’s and partnership firms remain unchanged. Therefore, government may align tax rate for LLP’s and partnership firms to that of companies to 25%.
2. Increasing the turnover threshold of concessional tax rate
In the 2018 Union Budget, the turnover threshold for availing concessional tax rate of 25% for companies was extended to Rs 250 crore. To extend the benefit to a larger number of companies, the turnover threshold may be raised further
3. Clarity on applicability of ‘angel tax’
There has been a lot of confusion and debate around applicability of ‘angel tax’ particularly after CBDT’s issuance and immediate withdrawal of circular, and therefore interim budget should bring clarity on the issue.
The changes in the interim budget would remain a matter of debate till the budget is presented and it would be interesting to see if the government brings in significant tax savings options for the taxpayers or it will be business as usual.