Future Generali

5 significant changes to Income Tax laws in the past 5 years

The Finance Minister of the government at the centre introduced several income tax changes since his first budget in 2014 to the one in 2018. These 5 years saw several measures being taken to cheer up the salaried class and senior citizens. Let us take a look at some of them:

1.Raising the basic limit of tax exemption:Until 2013, a taxpayer with an annual income of ₹2 lakhs was not required to pay Income tax. A change in the Income-tax rule was brought about in Budget 2014 when the limit was hiked by ₹50,000. Due to this, an individual with a yearly income equal to or below ₹2.5 lakhs was exempted from paying tax.

2.Additional deduction:2015 saw some critical income tax changes, the most prominent being the introduction of a new section, 80CCD(1b) that allowed an individual to claim a deduction of upto ₹50,000 in the government’s National Pension Scheme(NPS). This was beyond the maximum deduction of ₹1.5 lakh under Section 80C. One could now secure a tax deduction of ₹2 lakhs in a financial year by utilising both these deductions to the fullest.

3.Increase in House Rent Allowance(HRA):The government’s third budget in 2016 brought a change in the Income-tax rule of the deduction for those who are not paid HRA by their employer. Such an individual could only claim a maximum amount of ₹24,000 as a deduction, before 2016. This was increased by 75% to ₹60,000, protecting those with no HRA component in their salary.

4.Reduction in income tax rate:Budget 2017 slashed the tax rate for the income slab of ₹2.5 lakhs to ₹5 lakhs from 10% to 5%. As a result, taxpayers across brackets could save more, with the total savings adding up to ₹ 12,500.

5.Standard deduction:Until 2017, salaried individuals got medical reimbursement of ₹15,000 and a transport allowance of ₹19,200 annually from their employer against the bills that they produced. Among the income tax changes of Budget 2018, was the landmark decision towards a standard deduction of ₹40,000 for all. It allowed not only those employed with a company but also pensioners to claim this amount as a deduction without submitting any proof of expenses.

Income tax changes such as waiving off tax on Sukanya Samriddhi scheme, increasing health insurance deduction for senior citizens as well as raising tax exemption on deposits are positive moves. While the former promotes the inclusion of girl child the latter focuses on the needs of an increasingly aging population of the country.

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