‘No tax’ on pay up to Rs 6.4L per annum with loan, investment

Tribune News Service

New Delhi, February 14

The government is trying to quell the perception that the Union Budget does not hold much for the middle class by pointing out that the after the introduction of standard deduction, salary income up to Rs 2.9 lakh per annum will attract no tax. On adding investments and home loans, no tax will be levied on salary up to Rs 6.4 lakh per annum, it has claimed.

Government officials while stressing that this Budget caters to all sections of society, including the middle class, said: “This Budget not just helps us in our day-to-day lives but also builds the foundation of a better future.”

They pointed out that the BJP government has ensured that the entry-level income tax is one of the lowest in the world. A person earning around Rs 42,000 a month or Rs 5 lakh per annum pays Rs 12,500 income tax (effective rate of 2.5 per cent) under Rs 5 lakh. After standard deduction of Rs 40,000, salary income up to Rs 2.9 lakh per annum will attract no tax.

Government officials pointed out that with savings of Rs 1.5 lakh, a person with salaried income of Rs 4.4 lakh per annum or monthly salary of Rs 36,600 will not have to pay any income tax. In addition, if a middle class family has taken home loan, then interest payment up to Rs 2 lakh is exempt from income tax. This effectively means, with savings or house loan repayment up to Rs 6.4 lakh of salary income per annum or Rs 53,300 per month need not pay any income tax.

Officials also pointed out that the middle class also comprises a sizeable number of senior citizens for whom income from interest up to Rs 50,000 has been made tax-free. This results in savings of Rs 2,000-12,000 a year.

In addition, the deductions for health insurance premium of senior citizens have been raised to Rs 50,000, which results in savings of Rs 1,000-6,000 a year.

Official sources have emphasised the need for a more nuanced discussion on the long-term capital gains tax (LTCG) in the stock market. They pointed out that considering a 15 per cent return on equities, earnings from Rs 6.7 lakh investment will be around Rs 1 lakh which will not be taxable.