Income Tax in New Budget Live: Income Tax changes under Modi government

Income Tax in New Budget Live: Income Tax changes under Modi government

The income tax slabs have had a complete makeover since 2014 when the Modi government first came to power. The then Finance Minister late Arun Jaitley presented the first budget of the Modi government in July 2014 when the exempted income was hiked from Rs 2 lakh to 2.5 lakh. The easing of income tax slabs has been on a continuous spree since then with more benign tax rates for the middle class. The tax slabs in the next budget presented by Jaitley in 2015 remained unchanged, however there were many incentives offered in the second budget. A corpus of Rs 50000, invested in the National Pension Scheme (NPS), was offered as an additional deduction from the taxable income. Wealth tax on the super rich was also abolished in the same year.

In the same breath, tax rebate under section 87 A was increased from Rs 2000 to 5000 for people up to the income of Rs 5 lakh in the budget presented by Arun Jaitley in the year 2016. Rent deduction from the taxable income was also hiked sizeably to Rs 60,000 a year from Rs 24,000 previously. Unlike the variation seen in the tax policy for the super rich, the Modi government consistently moved towards rationalisation of tax rate for the middle class in 2017 as well. The flat rate of 10% tax on the income above 2.5 lakh and up to Rs 5 lakh was reduced to 5%. The cut resulted in the saving of Rs 12,500 a year for the payees.

Biding its time for the bumper announcement next year in the election year of 2019, the Modi government in 2018 settled with offering standard reduction of Rs 40,000 along with raising the medical expenditure reduction from the taxable income for senior citizens to Rs 50,000. In the interim budget presented by incharge Finance Minister Piyush Goyal the government loosened the string by the highest margin so far. Going full throttle, Piyush Goyal announced the rebate of Rs 12,500 to all the payees up to the taxable income of Rs 5 lakh. The announcement without changing the tax slabs benefited a large pool of taxpayers. In the last budget presented by Finance Minister Nirmala Sitharaman, the government did not alter the tax slabs and went ahead with the slabs presented by Goyal.