Union Budget 2014: Personal income tax exemption limit raised to Rs 2.50 lakh

Union Finance Minister Arun Jaitley today announced no changes to the country’s income tax rate; however the personal income tax exemption limit was raised from Rs 2 lakh to Rs 2.50 lakh.

He also raised 80C exemption limit to Rs 1.5 lakh. This move aimed at boosting household savings. The hike in exemption limit for investments by individuals in financial instruments to Rs 1.5 lakh would come as a sigh of relief for the salaried class blatting high inflation. Presently the investments and expenditures up to a combined limit of Rs 1 lakh get exemptions under Sections 80C, 80CC and 80CCC of the Income-Tax Act.

Investments under 80C up in popular tax saving instruments such as the public provident fund, national savings scheme, unit-linked insurance plans and equity-linked savings schemes are not taxed up to the allowed threshold.

Section 80C was introduced by the UPA government in 2005-06 with a limit of Rs 1 lakh, which was not revised since. While presenting the National Democratic Alliance government’s first Budget in office, Jaitley increased tax exemption limit to Rs 3 lakh for senior citizens.

Exemption on payment of income tax on interest paid on loans for self occupied houses was also raised to Rs 2 lakh from Rs 1.5 lakh. No changes were made to surcharge rates for direct tax and education cess for all tax payers including corporates remains at 3 percent.

During the run-up to the elections, both prime minister Narendra Modi and finance minister Jaitley had spoken about the need to “rationalize” taxes in the country even though the party’s manifesto had stayed away from providing a specific view on the income tax structure.