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5 income tax changes expected in Modi 2.0 government’s first Budget
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Nirmala Sitharaman will present the first Budget of second term of the Modi government on July 5. Despite the Modi 1.0 government announcing some tax relief in the interim Budget in February, there are expectations that the finance minister may announce some more relief on the income tax front on Friday but not much. Many analysts expect the budget to be pro-growth and tax sops will add stimulus to an economy that has slowed sharply this year. “Many benefits for individual taxpayers were already introduced in the interim budget. Not much can be expected on that front in the coming budget exercise," says Sandeep Sehgal, director of tax and regulatory at Ashok Maheshwary & Associates.

1) Higher income tax exemption limit: The finance minister may raise the tax exemption limit for individuals to 3 lakh of their annual income, up from the current 2.5 lakh, Bloomberg had earlier reported, citing sources.

Archit Gupta, founder and CEO of ClearTax, is hopeful that exemption limit will be raised to 3 lakh. The proposed tax move would put at least 2,500 more in the hands of taxpayers.

2) More income tax relief on NPS withdrawal: In December last year, the government had hiked the tax exemption limit for lumpsum withdrawal on exit from NPS to 60%. With this, the entire withdrawal will be exempt from income tax. Currently, out of 60% of the accumulated corpus withdrawn by NPS subscribers at the time of retirement or reaching the age of 60, 40% is tax exempt and balance 20% is taxable. 40% of the total accumulated corpus utilised for purchase of annuity is already tax exempted.

ClearTax’s Archit Gupta says that NPS changes have not yet been notified. “Hopefully they will be included in this year’s Budget, as per the Cabinet announcement made earlier.

“NPS is an excellent product in many ways and we hope the govt will continue to reform and popularise it," he adds. “One way could be to increase the 50,000 deduction under section 80CCD(1B) to 1 lakh."

3) Higher Section 80C Deduction Limit: The Finance Ministry is also looking at raising the tax exemption limit for savings and investments made under the Section 80C of the Income Tax law, Bloomberg had reported, citing sources. Currently, the limit is set is 1.5 lakh. Nitin Baijal, director at Deloitte Haskins and Sells LLP, says that due to ever rising inflation levels and steep medical expenses, policy makers could consider increasing the deduction under Section 80D from the current25,000 to 35,000, to ensure affordability and accessibility of medical treatment to all class of patients.

5) Higher LTCG limit: The government could consider increasing the threshold limit of LTCG (long-term capital gains) on sale of listed equity shares and units of equity-oriented mutual funds which is currently pegged at 1 lakh per financial year, says Poorva Prakash, senior director at Deloitte Haskins and Sells LLP. In the Finance Act, 2018, changes were made under capital gains taxation regime wherein tax was levied on long-term capital gains (LTCG) exceeding 1 lakh from the sale of listed equity shares and units of equity-oriented mutual funds, which were fully exempt previously. These changes were made effective from 1 February 2019 as capital gains up to January 31, 2018 were grandfathered (i.e. were kept exempt from tax).

Source : Live Mint back