In new regime, less slab rates

No tax on income up to Rs 7L; govt raises capital expenditure, shows fiscal prudence

NEW DELHI: In Modi government’s last full Budget before general elections, Union Finance minister Nirmala Sitharaman on Wednesday unveiled tax rebates and saving plans to woo the middle class, women and pensioners, and announced massive spending on housing and infrastructure as she walked the tightrope between staying fiscally prudent and meeting public expectations.

The personal income tax rebate limit has been increased to Rs 7 lakh from the fiscal year starting April 1 under the new tax regime, from the previous Rs 5 lakh. Tax slabs have been cut to five from seven earlier. Also, the maximum income tax rate has been reduced to about 39 per cent from 42.7 per cent after a reduction in the highest surcharge to 25 per cent from 37 per cent.

Besides, the deposit limit for senior citizen savings schemes has been doubled to Rs 30 lakh and for Monthly Income Account Scheme to Rs 9 lakh. A new small savings scheme for women, offering 7.5 per cent interest rate on deposits of up to Rs 2 lakh for a tenor of 2 years, has also been announced.

But the Budget has capped tax exemption on maturity amount for policies exceeding Rs 5 lakh annual premium.

Maturity proceeds of all life insurance policies (other than unit-linked insurance policies or ULIPs) that are issued after April 1, 2023, and have an annual premium of more than Rs 5 lakh, will now be taxable.

Sitharaman’s fifth straight Budget comes at a time when the economy is slowing due to global headwinds and there is a need for increased spending on social sectors as well as ramping up incentives for local manufacturing.