#Budget2021: Salaried Taxpayers Can Get Rs 80,000 Relief In Income Tax! How Will This Happen?
Last week, we informed you of there being an expectation of increase in the current Income Tax exemption limit under Section 80C of the Income Tax Act from Rs 1.5 lakh to about Rs 3 lakh, which would attract more investment, thereby boosting overall development.
Additionally, many individual taxpayers have also been looking forward to witnessing a personal tax relief in the upcoming Budget.
To such taxpayers, here comes some good news.
The discussions held during the upcoming Budget exercise show inclination towards a possible tax relief for individual taxpayers, in the range of Rs 50,000-80,000 in the total tax liability.
Let’s learn more about this.
Tax Relaxation Expected in Budget 2021
According to a survey conducted by FICCI and Dhruva Advisors, of individual taxpayers, about 40% participants demanded ‘personal tax relief’ to be the key theme of direct tax proposals in the upcoming Budget, while about 47% respondents desired the tax slabs to be widened, wrt direct taxes.
As per latest reports, individual taxpayers can expect a tax relief of Rs 50,000 to Rs 80,000 in the total tax liability.
There may also be changes made under the old income tax regime, along with the new one, the latter introduced just in the last Budget.
Changes Expected Under the New Tax Regime
The new income tax regime was introduced just last year, however there is not much appreciation/excitement among taxpayers for it.
This is because although the new tax regime is applicable at a lower rate, taxpayers will have to give up the advantage of certain permissible exemptions and deductions available under the old regime.
Consequently, to popularise the idea and adoption of the new regime, there could be changes made in the current slab rates, which would help taxpayers save taxes.
Currently, the income tax slabs look like this:
- No tax for income upto Rs 2.5 lakh,
- 5% tax rate for income between Rs 2.5 lakh-5 lakh,
- 10% tax rate for income between Rs 5 to 7.5 lakh,
- 15% for income between Rs 7.5 to 10 lakh,
- 20% for income between Rs 10 to 12.5 lakh,
- 25% for Rs 12.5 to 15 lakh, and
- 30% for income of Rs 15 lakh and more.
Changes Expected Under the Old Tax Regime
Discussions in the Budget 2021 exercise also suggest there to be some changes made under the old tax regime.
To provide relief to taxpayers, there have been proposals to increase the standard deduction, under the old regime.
Standard deduction is a fixed deduction made from the annual salary, which reduces the taxable income, thereby reducing the payable tax amount.
Currently, the standard deduction is up to Rs 50,000. Thus, if the standard deduction limit is increased under the tax regime (old), taxpayers will end up with more money in their hands.
A source close to the matter has informed a possible tax relief on housing loan, under this regime.