Those hoping for a relaxation in income-tax slabs or rates are probably a disappointed lot, except few.
Those hoping for a relaxation in income-tax slabs or rates are probably a disappointed lot, except few. While Finance Minister Piyush Goyal did not tinker with the tax slabs or relax the tax rates, he has given full tax rebate for taxpayers having taxable income of Rs 5 lakh.
If you add the Rs 4.75 lakh tax exemptions that you can use, this effectively means that up to around Rs 9.75 lakh of taxable income will attract no tax whatsoever.
Read: No tax upto Rs 5 lakh but there's a catch
If you are not a salaried employee, you can escape paying any tax with income of up to Rs 9.25 lakh.
“Individual taxpayers having taxable annual income up to Rs 5 lakh will get full tax rebate and therefore will not be required to pay any income tax...this will provide tax benefit of Rs 18,500 crore to an estimated 3 crore middle-class taxpayers comprising self-employed, small business, small traders, salary earners, pensioners and senior citizens,” FM Piyush Goyal said in the Budget speech.
While the Interim Budget 2019 has not increased the basic exemption limit from Rs 2.50 lakh, it has increased tax rebate under Section 87A from Rs 2,500 to Rs 12,500 and would cover taxpayers having taxable income up to Rs 500,000.
Read: Who gets what from Piyush Goyal's budget?
“The rebate on the total income is after considering the eligible deductions under section 80C, 80D, 80CCD, etc, interest on housing loan deduction and other income. This would mean that individual taxpayers even having income up to Rs 9.25 lakh (Rs 9.75 lakh for salaried employees) can escape the tax net,” says Suresh Surana, founder of RSM Astute.
Below we have explained the same in details.
1. What's taxfree?
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A salaried earner can use Rs 2 lakh interest tax benefit on housing loan deduction for a self-occupied property, Rs 1.5 lakh Section 80C tax saving investment window, Rs 50,000 tax benefit for additional NPS investment, Rs 25,000 mediclaim tax benefit and Rs 50,000 standard deduction. This all adds up to Rs 4.75 lakh. So, if you earn Rs 9.75 lakh, there is no tax for you. The non-salaried earners will get all tax exemptions except the standard deduction of Rs 50,000, meaning those earning Rs 9.25 lakh of income will pay zero tax.
2. Save some more
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If you are earning Rs 6.5 lakh and are doing just Rs 1.5 lakh Section 80C tax saving investments out of that, all the Rs 6.5 lakh income will attract no tax. Alok Agrawal, Partner - Deloitte India, said: “Individual taxpayers with gross annual income up to Rs 6.5 lakh will not have to pay any tax (if they have deductions up to Rs 1.5 lakh). However, it appears they will still need to file tax returns. Further, the standard deduction increase from Rs 40,000 to Rs 50,000 will help all salaried taxpayers who lost over Rs 34,000 last year due to the removal of medical reimbursement and transport allowance exemptions.”
3. Benefit to approx 2.5 crore taxpayers
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Ashok Shah, Partner, NA Shah Associates LLP estimates over 2.5 crore taxpayers who are expected to have income between Rs 3.5 lakh and Rs 5 lakh will not have to pay any tax.
4. A summary of what has been proposed
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INTERIM BUDGET 2019-20
Rs 5,00,000 – Limit for full tax rebate individual taxpayer can avail
Rs 4,75,000 – Total deductions one taxpayer can effectively claim
Rs 50,000 – Standard deduction for salaried taxpayers as per the Interim Budget
Rs 40,000 – TDS threshold limit on bank, post office fixed deposits (FDs)
