Budget 2019 gives little to the rich, a lot to low income group: Here’s who gains and how much

Main gain from Budget 2019 proposals for salaried and pensioners is reduction in tax burden due to the proposed increase in standard deduction from earlier Rs 40,000 to Rs 50,000. The Budget 2019 also proposes rebate for all those with taxable income upto Rs 5 lakh. Tax on deemed rent from second vacant house payable by house owners has also been abolished.

Who gains and by how much:

1. Budget 2019 has increased standard deduction for the salaried and pensioners to Rs 50,000 from the existing Rs 40,000. The increase in standard deduction by Rs 10,000 means a saving of Rs 2080 for those with income from Rs 5 lakh to Rs 10 lakh, a saving of Rs 3120 for those with income from Rs 10 lakh to Rs 50 lakh and Rs 3432 for those with income above Rs 50 lakh upto Rs 1 crore. Those with incomes above Rs 1 crore will save only Rs 3588. These figures include cess and surcharge. Standard deduction for current FY is Rs 40,000 and is proposed to be hiked to Rs 50,000 for FY2019-20.

Also read: Standard deduction limit hiked to Rs 50,000

2. The bigger gainers are all individuals with net taxable income upto Rs 5 lakh who will not have to pay any tax as per Budget 2019 proposals. Those in this category were paying a maximum tax of Rs 13,000 earlier. Therefore, it amounts to a saving upto Rs 13,000 for all those in this category. It is to be clarified that this benefit is in the form of a rebate of entire tax payable only for those with taxable income upto Rs 5 lakh, according to Shalini Jain, tax partner, people advisory services, EY. In case your taxable income crosses this level then the regular existing tax slab rates of 5%, 20% and 30% plus cess and surcharge will apply.

Also read: Only those with income up to Rs 5 lakh to pay no tax

The income level for this purpose will be taxable income and not gross total income. Therefore, someone with higher gross income can invest in tax saving avenues which would allow him to claim deductions from his/her gross total income to reduce it to Rs 5 lakh or below, says Shalini Jain. For example, if a person earns Rs 6.5 lakh and invests Rs 1.5 lakh under section 80C then he/she can claim a deduction of Rs 1.5 lakh from the gross income and reduce it to Rs 5 lakh. Other sections of the Income Tax Act which provide deductions from gross total income such as standard deduction for salaried and section 80D can also be used similarly.

3. Those with two houses were earlier liable to pay income tax on deemed rent on their second house if it was not rented out/vacant. One house was allowed to be treated as ‘self occupied’ property and no tax was payable if it was self occupied/ vacant. This comes as huge relief for home owners and may encourage more people to invest in property. The amount of tax relief in this case will depend on the amount of ‘deemed rent’ on which tax was payable earlier.

Also read: Budget 2019 proposes to abolish tax on deemed rent from 2nd vacant house

4. TDS limit has been raised for income from bank and post office deposits for individuals aged up to 60 years. Also TDS limit has been raised for non-individuals paying rent. These moves will increase tax convenience for those involved but there is no specific tax saving for them.

Also read: TDS limit on bank, post office deposits hiked to Rs 40,000