Pre-budget 2019 expectations: Personal taxation

By Divya Baweja

1. National Pension Scheme: Withdrawals under the NPS attract partial taxes at the time of withdrawal. This implies that while contributions and accretions to the NPS are exempt up to a limit, withdrawals would be taxed as normal income. Subscribers to NPS, upon attaining the age of 60 years, are allowed to withdraw 60% of the corpus out of which 40% is tax exempt and balance is 20% is taxable and remaining 40% is compulsorily required to be invested in a monthly pension annuity plan.

Further, there is a proposal in the pipeline for exempting entire 60% of the corpus withdrawn as tax exempt which is yet to be announced by the Government.

2. Increase in 80C limit: While the deduction under Section 80C provides for various types of payments by the taxpayer covering expenses (e.g. children tuition), investment and housing (e.g. housing loan repayment) and retirement fund contributions (e.g. PPF), the overall limit of INR 1.5 lakh (excluding NPS contribution) is very low. The government may consider increasing the 80C limit from INR 1.5 Lakh at least to INR 2 Lakh specifically for specified investments in identified avenues of importance such as Schemes promoting Savings/Investments, etc. This shall help the individual to additionally save tax of INR 2,500 to INR 15,000, depending upon the applicable tax slabs.

3. Increase in 80D limit: The Government may increase the current limit of deduction for health insurance premium from INR 25,000 to 35,000

4. Road map to Direct Tax Code may be explained by the Government in this Budget

5. No change is expected in tax slabs – the current year slab rates after Interim Budget 2019 is as below :

Status of individual	Slabs (INR)
	Nil	5%	20%	30%
General category	250,000	250,001 –500,000	500,001 –1,000,000	1,000,001 & above
Resident –Senior Citizen (60 to 79 years)	300,000	300,001 -500,000	500,001 –1,000,000	1,000,001 & above
Resident –Very Senior Citizen (80 years and above)	500,000		500,001 –1,000,000	1,000,001 & above

• Surcharge @ 10% of the total tax if the total income exceeds INR 5 million but up to INR 10 Million.

• Surcharge @ 15% of the total tax if the total income exceeds INR 10 Million.

• Health and Education Cess payable at the rate of 4% of total tax including surcharge.

• Rebate under Section 87A increased to INR 12,500 for resident individuals whose total income does not exceed INR 5,00,000.

Divya Baweja is a partner in Deloitte India.