Budget 2019: Increase 'no-tax' limit to Rs 3 lakh, HDFC Securities says will give Rs 2,500 more in the hands of citizens

Many wish-lists are making the rounds ahead of Budget 2019 presentation by Finance Minister Nirmala Sitharaman. Major tax rebates are expected from Sitharaman in the form of introduction of 10% rate, enhancing income category, etc. But how would you feel if the government could increase the 'no-tax' limit to Rs 3 lakh for salaried individuals? This would definitely be a major breakthrough for this income category citizens. But guess what! Possibilities are that Sitharaman may actually look into tax exemption upto Rs 3 lakh salary. 

Experts at HDFC Securities in a research note stated that raising exemption limit for income tax from Rs 2.5 lakh to Rs 3 lakh will be a welcome move for capital markets and citizens. The note highlights that, this tax move could put at least Rs 2,500 more in the hands of each of India’s 50 million taxpayers boosting their spending power. 

Currently, no taxes are levied upto Rs 2.5 lakh income on those taxpayers who are below 60 years of age. While, senior citizens (60 years to 80 years) and very senior citizens (above 80 years of age) do not have to pay taxes upto income Rs 3 lakh and Rs 5 lakh. 

However, in the interim Budget 2019, the government has already announced tax rebate for Rs 5 lakh income category under section 87A of Income Tax Act, where the taxable amount would be Rs 12,500.

The expert in the note said, “The forthcoming Union Budget (the first by Mrs Nirmala Sitharaman) is awaited keenly in the background of the slowdown in the economy and liquidity squeeze faced by most businesses. Overall activity from eight high-frequency indicators show the economy lacks momentum. Gross domestic product growth has slowed to a five-year low of 5.8% (nominal growth 9.4% - a 13 quarter low) in the first quarter of 2019. Even the Global IIP is slowing and is near decadal lows. It will be prudent to lift government spending that can offset private sector slowdown. This being the first Budget of Modi 2.0 will also lay down broad guidelines on the thought process of the Govt after winning a large majority.”