The government announced a few changes in income tax rules in interim budget earlier this year. Key changes in the income tax law included a full tax rebate on annual income up to Rs.5 lakh and a 25 per cent hike in standard deduction allowed to salaried individuals and pensioners. These income tax rules will come into force from Assessment Year 2020-21 (financial year 2019-20). Careful planning of investments as per income tax laws can lead to a significant reduction in the assessees' overall tax outgo, say financial advisors.
In the interim Budget, the last Budget announced ahead of the general election which concluded in May this year, the government announced the following measures, among others:
- Full tax rebate on annual personal income up to Rs. 5 lakh; in other cases; income tax rates/slabs unchanged
- Standard deduction limit raised from Rs. 40,000 (Budget 2018) to Rs. 50,000
- Hike in TDS (tax deducted at source) threshold applicable to interest earned on bank/post office deposit
Experts have shared few examples to explain the changes in income tax liability as per the proposed changes in laws:
|Budget 2019 tax calculation examples|
|Taxable annual income in rupees (after adjusting deductions)||350,000||400,000||500,000||1,000,000|
|Tax||5,000 (@ 5% on 1,00,000)||7,500 (@ 5% on 1,50,000)||12,500 (@ 5% on 2,50,000)||1,12,500 (@5% on 2,50,000, 20% on 5,00,000)|
|Rebate under Section 87A of I-T Act||5,000||7,500||12,500||NA|
|Cess @ 4%||0||0||0||4,500|
|Tax payable (after cess)||0||0||0||117,000|
|Budget 2018 examples|
The government will announce its full-year budget for the current financial year on July 5, farm minister Narendra Tomar said in May.