Budget 2020: Clamour for more relief on exemptions on interest income grows louder

Tax experts are expecting more relief for common man from Finance Minister Nirmala Sitharaman in this year’s budget, particularly in terms of exemptions and deductions as there is little scope to change the income tax slabs.

Hyderabad: As the date for Union budget comes close, the clamour for more relief for income tax payers has grown louder.

Prime Minister Narendra Modi’s government had last year extended relief to the middle class taxpayers ahead of general elections by amending the section 87A of the Income Tax Act.

It made the income up to Rs 5 lakh completely tax free without tinkering with the tax slabs due to the sensitivities of an election year.

However, tax experts are expecting more relief for common man from finance minister Nirmala Sitharaman in this year’s budget, particularly in terms of exemptions and deductions as there is little scope to change the income tax slabs.

“I think the government should give more relief on interest incomes from saving accounts as well as from fixed deposits,” said New Delhi based tax expert KK Mittal.

At present, income up to Rs 50,000 in a year from saving account and fixed deposits is exempted in case of senior citizens, the taxpayers who are above the age of 60 years.

However, in case of non-senior citizens, the interest income of only Rs 10,000 in a year is exempted under section 80 TTA of the Income Tax Act of 1961.

Moreover, this exemption of Rs 10,000 is only applicable in case of interest income from saving accounts and not from fixed deposits, putting other assesses at a disadvantage.

“This exemption of Rs 50,000 on interest income should be given to all assesses irrespective of their age,” KK Mittal told ETV Bharat.

He also recommended that the government should remove the distinction of interest income from saving deposits and fixed deposits for giving the exemption even in case of non-senior citizen taxpayers.

He believes that there is a strong case for giving tax relief on interest income as the applicable interest rate on several fixed-term instruments like FDs is less than the Consumer Price Index.

“In most of the cases, the annual interest rate on fixed-term instruments is between 6-7% whereas retail inflation has reached above that level,” he said adding that it means there was no real income from the fixed deposits or saving accounts.

According to the latest official data, retail inflation measured as the Consumer Price Index was 7.35% in December last year, highest since July 2014 when it was 7.39%.

(Article by Senior Journalist Krishnanand Tripathi)