Today I would be talking about the impact on common man’s tax liability as per the current Budget 2014. Mr Arun Jaitley the current finance minister under the leadership of PM Narenda Modi made quite a few changes in the taxing scenario. These changes would be applicable in this current fiscal year 2014-15 ie Assessment year 2015-16.
Major Changes in This Budget
1) Tax exemption limit has been raised by Rs 50,000 in all categories
2) Home loan interest tax exemption raised by Rs 50,000 from current Rs 1.5 Lakhs to Rs 2 Lahks
3) Limit of 80C increased by Rs 50,000 from Current Rs 1 Lakhs to Rs 1.5 Lakhs
Now if we look this from a broader sense looks like we can get an extra Rs 1.5 Lakhs in the form of tax savings. But if you would just put yours mind right than this has been a very wise decision taken by Mr Arun Jaitley. If a person say earns Rs 5 lacks per annum he cannot practically avail all the three tax exemptions announced. He is more likely to enjoy only the raised tax exemption Limit. As the Limit of 80C and Home Loan has been increased he cannot avail it as he first has to earn more money to save more. (Assuming he already saves Rs 1 lakh in 80C and also avails a home loan interest excemption of Rs 1.5 lakhs)
Now the second category would fall for a person earning around Rs 10 Lakhs per annum. He can enjoy almost 2 benefits out of the 3. If this person has taken a hefty loan so as to avail the Rs 2 Lakhs home loan interest tax benefit he would hardly have any money for extra Rs 50,000 thousand to save in his 80c (assuming he already saves 1lakh Rs in 80 C). He can avail this extra 80C exemption only if his loan amount is less thus making him a tentative case of only availing 2 out of the 3 benefits.
Now the third person would be a person earning more than Rs 15 Lakhs per annum or more this would be the ideal person to avail all 3 tax benefit presented in the financial budget.
Just to summarize this blog that the benefits have been given but divided in such a way that if you earn more you can save more. Since most of the people in Indian earns less that Rs 5 lakhs per annum the exchequer will not be impacted in such a way if almost everybody would have availed Rs 1.5 Extra tax benefit. Thus I would say a smart move by a wise man.