- How much money can a taxpayer save after the budget depends on one’s income
- If one earns less than Rs 3.5 lakh per year, tax rebate changes in this budget make no difference to the person as a taxpayer
- A person earning Rs 5 lakh is also not any better as regards the taxes
How much has Piyush Goyal’s budget saved you as a taxpayer? That depends on what your income is and where it comes from. If you earn less than Rs 3.5 lakh per year, tax rebate changes in this budget make no difference to you as a taxpayer since you were entitled to a full rebate even earlier. Similarly, if you earn over Rs 5 lakh a year, you are no better off. If, however, your income is somewhere between these two figures, your tax bill will become zero + , so you save as much as you were paying in tax earlier. That could go up to Rs 13,000 per annum (including a 5% tax rate and a 4% cess) if you are just under the Rs 5 lakh limit.
Here’s an interesting nuance though. If your annual salary is Rs 5 lakh, you don’t gain by an increment of Rs 15,000, because your tax bill at this level would be Rs 15,000, so you’re effectively back to Rs 5 lakh. One way to get around this is to get a part of the increment in reimbursements to stay within Rs 5 lakh.
The change in standard deduction for salary earners from Rs 40,000 to Rs 50,000 will benefit even those with annual incomes above Rs 5 lakh. Again, how much you gain depends on the tax slab you fall in. Below Rs 5 lakh a year, you save Rs 520 in tax and cess; between Rs 5 lakh and Rs 10 lakh you save Rs 2,080; from Rs 10 lakh-50 lakh you save Rs 3,120. If you earn beyond Rs 50 lakh but less than Rs 1 crore, your savings would be Rs 3,432 (including a 10% surcharge), and if you are in the crorepati income category you can save Rs 3,588 (surcharge 15%).
Those with two houses, one of them locked up, can celebrate. They would earlier have paid tax on presumed rent for the locked-up house; they won’t have to now. If you had such a house in an area with rentals of Rs 25,000/month, that’s a saving of Rs 93,600 in tax over a year if you’re in the 30% tax bracket. For more valuable properties or higher income levels, the savings would be correspondingly higher.
Another significant change is in the treatment of capital gains from sale of residential property. As of now, you would have to invest the sale proceeds in another house (or certain specified securities) within a year to escape capital gains tax. But it could only be in a single house.
Now, you can split that into two houses and can do so within two years. While this may not really mean savings in tax, it does afford greater flexibility and even more importantly allows you to plan your bequeathal to your kids better.
So if your income from these sources is within the new limits and your total income is under Rs 5 lakh, you will no longer have to file for refunds. But if your total income is over Rs 5 lakh, it just means you save on TDS but have to cough up more at the end of the year.
So, if you have two kids, you can sell your house and use the money to buy a house for each of them as joint owners with you rather than leaving them a mess to deal with after you’re gone.