The Government is expected to present a budget that will stimulate the economy and support flagging consumption. Union Budget 2019 ensures that crucial sectors of the economy like automobiles and consumer goods that have been facing consumption blues to be reformed. The Government is likely to cut taxes to provide a boost to consumption. The exemption limit for individuals may be raised to Rs. 3 Lakhs from the current Rs. 2.5 Lakhs. Though annual income up to Rs. 5 Lakhs is essentially tax-free, individuals still have to file income tax returns as the exemption limit is Rs. 2.5 Lakhs. The tax on income above Rs. 2.5 Lakhs has to be claimed as rebate under section 87A.
The Government may also notify the hiked tax exemption limit on withdrawal of lump sum amounts from National Pension Scheme, which was announced in December. If the change is notified, NPS will join instruments like PPF and EPF in EEE or the Exempt-Exempt-Exempt category. EEE status means that investments in NPS will be tax-free at all the three stages--investment, accumulation and withdrawal stage. With rising costs of medical care, an increase in deductions under Section 80D cannot be ruled out. Currently, investment of Rs. 25,000 for health insurance premiums qualifies for the deduction. The limit can be raised to Rs. 35,000 in the latest budget.