What are the benefits of the Income Tax Slab for FY 2019–20?

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    Income Tax Slab Rate

    A smart way of saving tax is by beginning your financial planning for the year by learning all there is to know about the Income Tax slab for FY2019-20. There is no change in the income tax slab for the current financial year. However, there are a few changes in standard tax deduction and tax rebates. Here are some key highlights of Interim Budget 2019:

    • As per Section 87A of the Income Tax Act, 1961, individual taxpayers with an annual income up to Rs.5 lakh will get full rebate of the tax.
    • In the case of salaried taxpayers, the standard deduction has been increased to Rs.50,000 from Rs.40,000. Over 3 crore salaried employees and pensioners can benefit from the increase in standard tax deduction by Rs.10,000.
    • The limit of Tax Deducted at Source (TDS) on interest earned on Post Office and bank savings deposits has been increased to Rs.40,000 from Rs.10,000.

    Income Tax slab (FY2019-20) for taxpayers aged below 60 years

    • Taxpayers with an annual income of Rs.2.5 lakh are exempted from tax.
    • Those with an annual income ranging from Rs.2.5 lakh to Rs.5 lakh have to pay 5% tax on total income minus Rs.2.5 lakh, and 4% cess.
    • Individuals with an annual income ranging from Rs.5 lakh to Rs.10 lakh will have to pay Rs.12,500 plus 20% tax on total income minus Rs.5 lakh, and 4% cess.
    • Those earning more than Rs.10 lakh per year will have to pay Rs.1,12,500 plus 30% tax on total income minus Rs.10 lakh, and 4% cess.

    If a taxpayer’s yearly income exceeds Rs.50 lakh, health and education cess of 4% will be added to the overall tax outgo in addition to a surcharge of 10% of the taxable income, for up to Rs.1 crore. For yearly incomes over Rs.1 crore, the surcharge will increase to 15% of the taxable income.

    Now for the good news, if your yearly income is up to Rs.5 lakh, as per Section 87A of the I-T Act, you will get Rs.12,500 tax rebate. Thus, bringing down your tax payment to zero.

    Income Tax slab (FY2019-20) for taxpayers aged above 60 years but below 80 years

    • Senior citizens i.e. taxpayers above 60 years of age don’t have to pay tax for an annual income Rs.3 lakh and below.
    • Those with an annual income ranging from Rs.3 lakh to Rs.5 lakh have to pay 5% tax on total income minus Rs.3 lakh, and 4% cess.
    • Senior citizens with an annual income ranging from Rs.5 lakh to Rs.10 lakh will have to pay Rs.10,000 plus 20% tax on total income minus Rs.5 lakh, and 4% cess.
    • Those earning more than Rs.10 lakh per year will have to pay Rs.1,10,000 plus 30% tax on total income minus Rs.10 lakh, and 4% cess.

    Income Tax slab (FY2019-20) for taxpayers aged above 60 years but below 80 years

    • In the case of super senior citizens i.e. taxpayers above 80 years old, the tax exemption is allowed for an annual income of up to Rs.5 lakh.
    • Senior citizens with an annual income ranging from Rs.5 lakh to Rs.10 lakh will have to pay 20% tax on total income minus Rs.5 lakh, and 4% cess.
    • Those earning more than Rs.10 lakh per year will have to pay Rs.1,00,000 plus 30% tax on total income minus Rs.10 lakh, and 4% cess.

    Tax exemption limit for Non-Resident Indians (NRIs), irrespective of their age, is a yearly income of Rs.2.5 lakh.

    Benefits of increase in standard tax deduction for FY2019-20

    In the Union Budget 2018, as per the proposed amendments by the Indian government to Section 17(2)(viii) of the I-T Act, on account of the standard deduction, there would have been an added income exemption of Rs.5,800. On the account of the Rs.10,000 increase in the standard deduction in the Interim Budget 2019, the taxable income has come down. This is illustrated in the table below:

    Salary details Till AY2018-19 From AY2019-20 From AY2020-21
    Gross Salary Rs.8,30,000 Rs.8,30,000 Rs.8,30,000
    Medical Allowance Rs.19,200

    Transport Allowance Rs.15,000

    Standard Deduction Not Applicable Rs.40,000 Rs.50,000
    Net Salary Rs.7,95,800 Rs.7,90,000 7,80,000

     

    Here is an example to illustrate how a salaried employee can get tax benefit as per the Income Tax slab for FY2019-20:

    Salary details Ms. Anna Ms. Prema
    Net Income Rs.5,00,000 Rs.5,05,000
    Tax on net income Rs.12,500 Rs.13,500
    Minus Rebate u/s 87A Rs.12,500 Rs.0
    Add Cess 4% Rs.0 Rs.540
    Tax to be paid Rs.0 Rs.14,040

    The below table shows how investments, standard deductions, etc., can help bring down payable tax amount to zero.

    Salary details Amount in Rs.
    Gross income Rs.9,65,000
    Minus standard deduction Rs.50,000
    Minus interest paid on house loan Rs.2,00,000
    Minus investment u/s 80C Rs.1,50,000
    Minus NPS Rs.50,000
    Minus health insurance Rs.25,000
    Total deductions Rs.4,75,000
    Total income Rs.4,90,000
    Tax payable Rs.0

    Visit here and Plan your budget and investment schemes as per the current year’s income tax slab, tax rebate and standard deductions, in order to save on tax.