It was announced by the Railways Ministry that salaried people with income less than Rs 5,00,000 will not have to pay tax. The standard deduction limit has also been extended from Rs 10,000 to Rs 50,000. Tax relief under Section 87A, allows exemption of Rs 2500 for those with income less than Rs 350,000.
Although the Indian Railways employes approx.12 lakh employees, over five lakh of these will benefit from this exemption, since most have income less than Rs 5,00,000. The exemption has also benefitted more than 38000 employees of Coal India.
The rebate will benefit even those employees whose gross income is up to Rs 6.60 lakh, as they will not need to pay tax at all if they invest in provident funds, insurance policies, and other specified savings. This means, an additional more than two and a half lakh employees of Indian Railways will benefit, that is, a total of more than eight lakh.
With additional deductions, such as interest on home loan up to Rs 2 lakhs, interest on education loans, National Pension Scheme contributions, medical insurance, medical expenditure on senior citizens, and so on, people with higher income will not have to pay any tax either.
This will provide tax benefit of Rs 18,500 crore to approx. three crore middle class taxpayers including the self-employed, small businessmen, salaried class, pensioners and senior citizens..
More than three crore salaried people and pensioners will benefitted from the raising of standard deduction level from Rs 40,000 to Rs 50,000.