New Delhi, Feb 29 (IANS): Union Finance Minister Arun Jaitley today gave a small relief of Rs 3,000 to individuals having an annual income of less than Rs 500,000.
Presenting the budget for 2016-17, Jaitley said the ceiling of tax rebate under Section 87A of the Income Tax Act has been proposed to be increased to Rs 5,000 from Rs 2,000. This will be applicable for individuals with an income less than Rs 500,000.
According to Jaitley, the move would benefit over two crore tax payers.
The limit of deduction of house rent paid under section 80GG has also been raised to Rs 60,000 from the existing Rs 24,000 per annum to give relief to employees who live in rented houses.
"To encourage the youth to be self employed, house rent deduction under section 80GG was expected to be revised considering the rentals in metros. Giving marginal relief to the self-employed, deduction under section 80GG has been raised from Rs 24,000 to Rs 60,000 to bring them on a level playing field with salaried taxpayers receiving house rent allowance (HRA)," Suraj Nangia, partner, Nangia & Co told IANS.
"The new limit is still not in line with the sky-high rentals in metro cities and also considering the deduction on account of HRA available to salaried persons, which can be substantial in cases where the salary and its HRA component are high," Nangia added.
In order to increase the penetration of the National Pension Scheme (NPS) and to make it attractive, Jaitley announced exemption of 40 percent of the corpus at the time of withdrawal.
Jaitley said the annuity fund which goes to legal heir will not be taxable.
In case of superannuation funds and recognised provident funds, including EPF, the same norm of 40 percent of corpus to be tax-free will apply in respect of corpus created out of contributions made on or from 1.4.2016.
He also said that the government is proposing the monetary limit for contribution of employer in recognised Provident and Superannuation Fund of Rs.150,000 per annum for taking tax benefit.
The service tax on single premium annuity policies has been reduced to 1.4 percent from 3.5 percent of the premium paid in certain cases.
Similarly, Jaitley also announced exemption of service tax for annuity services provided by NPS and services provided by Employees Provident Fund Organisation (EPFO).
On the indirect tax side, Jaitley announced abolition of 13 cesses levied by different central government ministries where the revenue collection is less than Rs 50 crore per year.