Income Tax Changes Can Save You up to Rs. 36,000

NDTV, NEW DELHI | 10 July 2014 16:16 IST

Finance Minister Arun Jaitley's Budget announcements will lead to big savings for income tax payers.

Mr Jaitley on Thursday hiked the basic exemption limit on income taxes from Rs. 2 lakh to Rs. 2.50 lakh.

Mr Jaitley also hiked the cap on long-term investments under Section 80C of the Income Tax Act from Rs. 1 lakh to Rs. 1.50 lakh. The Finance Minister also raised the tax-free cap on interest paid on housing loan from Rs. 1.5 lakh to Rs. 2 lakh.

Together, the three announcements will lead to a combined savings of Rs. 36,050 for individuals in the highest tax bracket (taxable income above Rs. 10 lakh), according to tax consultant BMR Advisors.

Individuals with taxable income between Rs. 5 and 10 lakh will save Rs.25,750, BMR Advisors said. Those with taxable income between Rs. 2 and Rs. 5 lakh will save around Rs. 15,450.

In another major announcement, Mr Jaitley enhanced the Public Provident Fund (PPF) ceiling from current Rs. 1 lakh to Rs. 1.5 lakh in a financial year. PPF is one of the most popular tax-saving schemes. 

The PPF corpus is tax-free at all three stages. The investment is eligible for tax deduction under Section 80C. The interest earned is also tax-free, and so are withdrawals.

Mr Jaitley said the government will forego around Rs. 22,000 crore on account of these changes.

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