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Piyush Goyal before presenting finance budget (@BJP/Twitter)
When Modi government introduced 10 per cent quota in government jobs and higher education for the poor among unreserved population of the country and declared Rs 8 lakh per annum family income as one of the criteria to avail it, many criticised it for treating those earning below Rs 8 lakh as economically weak but still taxing them because taxable income only up to Rs 2.5 lakh was tax-free.
However, from the upcoming financial year, this will change.
Under the new budget, the tax exempt limit rises to Rs 5 lakh in the form of a rebate, which means the exemption is only for this year and the tax base remains intact. The tax rebate will not be available for those earning more than Rs 5 lakh. The standard deduction rises to Rs 50,000 from Rs 40,000. If you own a second house, there will be no tax on notional income from it. The gratuity limit rises to Rs 20 lakh, a kind of post-dated cheque.
The tax breaks mean the middle class gets nearly Rs 7.5 lakh of tax-free income, if one takes the deductions from taxable income into account. To the basic exemption, we must add the 80C deductions of Rs 1.5 lakh, Rs 50,000 as additional contribution to the national pension scheme plus the higher standard deduction. This excludes any contributions to medical insurance premiums.
The total tax-free income is thus pretty close to the Rs 8 lakh income limit for the new 10 per cent quota for the economically weaker sections legislated last year.
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