Budget 2016 Brings Token Relief To Small Taxpayers

If there were high hopes from Budget 2016 for individual tax payers, it was short-lived. Budget 2016 hardly had any room to increase tax slabs or increase deductions for home purchases. But the finance minister did provide some token relief to the small taxpayers, and home loan buyers.

The first of the major reliefs comes in the form of raising the deduction limit under section 87A of the Income Tax Act from Rs 2,000 to Rs 5,000. This will allow tax payers to reduce Rs 2,000 from their total tax payable. However, the fine print is that it's applicable to individuals earning less than Rs 5 lakh. Finance Minister noted that this will provide relief to two crore tax payers.

For those who stay in rented apartments, there is a sliver of good news. In a move that provides some relief to people who don't own a house and who do not get a house rent allowance, the has given a relief of Rs 60,000 per annum, as against a relief of Rs 24,000 per annum.

If you are buying a house, there's another relief for first-time buyers to an extent of an additional Rs 50,000 as deduction on interest paid. But this additional deduction is limited to housing loans of a maximum of Rs 35 lakhs even as the value of the house purchased shouldn't exceed Rs 50 lakh.

A key development that the Finance Minister proposed is that the government will pay the employers' share of 8.33 percent in the EPFO for all new employees for the first three years. Through this, the government hopes to boost employment in the private sector and marks a rare time when the government has incentivized employment generation. But this will be applicable for persons with a monthly salary of Rs 15,000.

As was expected the Finance Minister sought to tax the rich individuals through this budget. The Finance Minister increased the surcharge on incomes exceeding Rs 1 crore to 15 percent as against 12 percent earlier.

In the dividend distribution tax, given the trade off between LTCG and Dividend Distribution tax, it's a fair trade. The nifty has moved into the green. There are some positives and negatives. It's the budget day you would expect the volatility. The long-term negatives. On the day, these things.