Hon’ble Finance Minister Nirmala Sitharaman will present her second budget for the financial year 2020-21 on 1st February 2020 preceded by an economic survey on Saturday, 31st Jan. Since the budget 2020 pronouncement is round the corner we have compiled here the list of expectation being put forth for individual’s tax relief
In the Financial Year 2020-21 the Assessment Year 2021-22 predictions are being made for:
- Increase in Income Tax Basic Exemption Limits
The basic exemption limit for individuals is expected to be revised to Rs 5,00,000. In addition to this predictions are also been made for reduced tax rates. Currently, the individual earning between Rs 5-10lakhs is required to pay income tax @20%. This tax rate is expected to go down and only those individuals having total taxable income for the year exceeding Rs 15,00,000 shall be levied tax @ 30%.
- More tax savings through investing in 80C
80C is one of the most popular and widely used tax-saving tools is expected to see an enhanced threshold limit of Rs 2,00,000.
- Children education and hostel allowances limits to be revised
Currently, the exemption for children’s education allowance of Rs. 100 p.m. per child & hostel allowance of Rs. 300 p.m. per child is available for a maximum of 2 children. Considering hiked rates of inflation it is expected that Budget 2020 will increase the limits upto Rs. 5,000/- per month per child for each allowance.
- Tax benefits on interest income to be increased for non-senior citizens
As per section 80TTA individuals aged upto 60 years can avail tax exemption in interest from the savings bank account on an income upto Rs 10,000. The scope of this section is expected to broaden and extend to other interest yielding sources like FD, RD etc and the limit to be increased upto Rs 50,000 in line with section 80TTb for senior citizens.
- Deduction threshold u/s 80GG to expand
Presently those employees who are paying house rent but are not getting HRA can claim the tax benefit upto Rs 60,000 u/s 80GG. This limit is expected to see an increment in the proposed union budget of 2020.
- Investment in education funds to attract tax benefits
The increased expenditure on education can pave a way to the introduction of Tax Saving Education Funds. The amount invested in these funds could be redeemed for the education of the child and will also give simultaneous tax benefits.
- Taxable income criteria to change for professionals and freelancers
The professionals or freelancers are required to offer 50% of their receipts as income under section 44ADA currently. This limit can be reduced upto 35%.
- Lower tax deduction (TDS) norms for professional in 2020
The professionals are subject to TDS @ 10% on an annual income exceeding Rs 30,000. The rate is expected to cut by 50% and the new TDS rate to be 5% u/s 194J.