This is my first opportunity to talk about the Union Budget, although it is more then two weeks old. And many of you must have already read about it or watched it time and again on television debates. Needless to say, unlike the previous Budget, where a lot of sops were given to the middle-income householders, in this Budget, it is evident that the focus is primarily on the lower-income group. Therefore, without wasting any time, let’s start to see what it holds for the normal salaried class.
EPS tax rollback
In a bid to bring parity between EPS (Emloyee Pension Scheme) and NPS (National Pension Scheme), the government had proposed taxing the EPS. The idea was to tax 60 per cent of all withdrawal, from the contributions which are to be made from the next financial year. But this met with a lot of noise and the present news is that government has made a rollback on the proposal. This proposed tax was basically an attempt to bring EPS in line with NPS, as withdrawals in NPS are taxable, unless invested in an annuity. Now that it has been taken back, the salaried class can breathe easy, as it would have hampered their financial liberty to a great extent, especially that of young professionals.
Extension of time for exemption from home loan
Once taking a home loan, the borrower has to complete his construction within three years or in case of buying a flat or an apartment, the builder needs to complete it within three years and give possession to the borrower, such that the borrower can avail the benefit of deduction of Rs. two lakhs under Section 24(B). But most of the time, builders or even in case of self-constructed property, it is difficult to complete the construction within three years of the stipulated time for tax rebate. This resulted in many borrowers to getting a rebate of only Rs. 30,000 after the expiry of the stipulated three years, instead of Rs. two lakhs. Now the grace period for construction has been increased to five years. This move is expected to benefit thousands of home owners waiting for the possession of their property.
Additional benefit of 50k for houses bellow 35 lakhs
Homeowners whose home loan is bellow 35 lakhs can rejoice, as an additional Rs. 50,000 has been added to the rebate of two lakhs on interest payment under Section 24(B). This is a move to encourage the lower income group to own their first property. However, this deduction shall not be allowed if the value of the property exceeds Rs 50 lakhs. Also, the property under question should be the first residential property of the individual. In another significant move, the government has waived off service tax on property of less than 60 square metres or 645 square feet. This clearly signals government’s focus on affordable housing for the lower-income group in this budget.
House rent deduction increased
This is a reason to smile for the self-employed and for employees who do not have a HRA (House Rent Allowance) component in their salary slip. In this budget, the government has increased the tax deduction from Rs. 24,000 to Rs. 60,000 for house rent allowance under Section 80GG, whose yearly income is less than Rs. five lakhs. This move will also bring some much-needed joy to the unorganised salaried and the self-employed.
(Correction from my last column: Ritu Goswami from Khanapara, Guwahati, has pointed out that Budget, 2015, has amended Section 80U to raise limit of deduction in respect of a person with disability from Rs. 50,000 to Rs. 75,000, and for a person with severe disability from one lakh rupees to one lakh, twenty-five thousand rupees. I thank Goswami for correcting me.)
The writer is the CEO of EconPenny
