Union Budget puts more money into taxpayers’ hands

The latest Union Budget presented by Finance Minister Nirmala Sitharaman was expected to do much to boost economic growth and put more money in the hands of individuals and common households. Experts and even the common folks hoped the budget would be positive and yet empowering. In these terms, the sops announced in this budget have lived up to expectations.

Affordable & Middle-Income Housing
This segment of the housing market has been doing really well in the last couple of years. The perception and quality of affordable homes has improved a lot in this time. A number of developers have also entered this market, thus boosting the choice available to homebuyers. Financial incentives such as PMAY-CLSS have also contributed to its growth.

In last year’s budget (FY 2019-2020) the Finance Minister defined affordable homes as any home costing up to Rs. 45 lakhs. She also announced an additional deduction of up to Rs. 150,000 for interest paid on loans taken for purchase of an affordable house. This deduction was allowed on housing loans sanctioned on or before 31st March, 2020.

In this latest budget the FM has extended the date of loan sanction for availing this additional deduction by one more year i.e. on or before March 31st 2021. The move will allow more families to avail of this financial benefit for a whole additional financial year and brings more liquidity into the real estate sector.

Choice of Tax Structure
The other expected budget announcement was a deduction in the personal tax rates. The FM announced a simplification of the personal tax structure with the announcement of 6 new tax slabs as follows:

1. 10% income tax rate for income between 5 -7.5 lakhs
2. 15% income tax rate for income between 7.5-10 lakhs
3. 20% income tax rate for income between 10 -12.5 lakhs
4. 25% income tax rate for income between 12.5-15 lakhs
5. Incomes above 15 lakhs remain at 30%
6. No tax for income up to five lakhs

However, alongside this revolutionary new tax structure, a number of deductions which could be claimed under the previous tax slabs will no longer be applicable. Despite this, according to FM Nirmala Sitharaman, a taxpayer having an annual income of Rs 15 lakh and not availing any deductions will now pay Rs 1.95 lakh tax in place of existing Rs 2.73 lakh. This results in considerable savings for this tax bracket. Similar savings are available under each of the tax slabs.

The onus is now on taxpayers to choose either the old or the new tax structure. This empowers households to choose how much they can save and under which tax structure. Individual taxpayers who are currently availing more deductions & exemptions under the Income Tax Act may choose to avail them and continue to pay tax in the old regime.

Certainly, individual taxpayers and households are experiencing a new era with a choice of tax structures and the ability to decide their tax saving avenues or choose to forego the deductions and still save tax! Further, there is commitment towards simplification of tax structures going ahead.

Conclusion
For first-time homebuyers who have been considering buying an affordable home there has never been a better time to do so. Overall, this has been an empowering budget for the individual taxpayer and common households.