Income tax 2019Salaried employees earning upto Rs 10.5 lakh a year can escape paying income tax. Yes, the Interim Budget 2019 has paved the way for you to pay zero tax if your income is under this limit. This is how it’s done.

Though the interim Finance Minister Piyush Goyal did not tinker with the tax slabs, he has given full tax rebate for taxpayers having taxable income of Rs 5 lakh. If you add the Rs 5.5 lakh worth tax exemptions that one can avail of, then those earning upto Rs 10.5 lakh taxable income can pay no tax whatsoever.

If you are not a salaried employee, you can escape paying any tax with income of up to Rs 10 lakh, because you cannot use the benefit of Rs 50,000 standard deduction available to salaried class.

Gross Income 10,50,000
Interest on Housing loan for self-occupied property – sec 24 200,000
Deduction – Section 80C (Insurance premium /Principal on housing loan / ELSS / NPS /) 150,000
Deduction under Section 80CCD(1B) – Additional investment in NPS 50,000
Deduction under Section 80D – Mediclaim 25,000
Deduction for parents (senior citizens Mediclaim) 50,000
Donation 100% exempt 25,000
Standard Deduction for salaried 50,000
Taxable income (Gross income minus deductions) 500,000
Income tax payable 12500
Rebate under section 87A 12500
Net tax payable Zero

Full tax rebate for income upto Rs 5 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, Goyal said in the interim Budget speech. It is estimated more than 3 crore middle class taxpayers comprising self employed, small business, small traders, salary earners, pensioners and senior citizens will benefit.

While the 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 5 lakh. Remember 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.

So, a salaried earner can use Rs 2 lakh interest tax benefit on housing loan deduction for 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 fort self or family, Rs 50,000 deduction for health insurance premium for parents or senior citizens, and Rs 50,000 standard deduction (which has been increased from Rs 40,000 to Rs 50,000 in this Budget). Add a donation of Rs 25,000 which is fully tax exempt, taking the total exemptions to Rs 5.5 lakh. So, this is how if you earn Rs 10.5 lakh, there is no tax for you.

In the case of the non-salaried, they can also get all the above mentioned tax exemptions except the standard deduction of Rs 50,000, which means those earning under Rs 10 lakh of income will pay nil tax.

Standard deduction hiked to Rs 50,000

The interim Budget 2019 has hiked the standard deduction from Rs 40,000 to Rs 50,000 which is another concession to salaried. Last year, then Finance Minister Arun Jaitley (who is currently on medical leave) had re-introduced the standard deduction of Rs 40,000 in the place of medical reimbursement (Rs 15,000) and transport allowance (Rs 19,200). It was done with an intention to reduce administrative hassles for salaried individuals. In the interim Budget 2019, standard deduction has been enhanced to Rs 50,000.

TDS on interest income: Limit hiked to Rs 40,000

The Budget 2019 has also announced an increase in TDS (tax deducted at source) limit in interest earned on bank and post office deposits. The limit has been hiked from Rs 10,000 to Rs 40,000. This is a significant move as a lot of senior citizens depend on interest income.

Tax relief

Goyal in his Budget speech said how reducing the tax burden on middle class has always been his government’s priority ever since 2014. “We increased the basic exemption limit from Rs 2 lakh to Rs 2.5 Lakh and gave tax rebate so that no tax was payable by persons having income up to Rs 3 lakh. We also reduced the tax rate from 10% to 5% for the tax slab of Rs 2.5 lakh to Rs 5 lakh and introduced Standard Deduction of Rs 40,000 for the salaried class. Deduction of savings under section 80C was increased from Rs 1 lakh to Rs 1.5 lakh. Deduction of interest for self-occupied house property was raised from Rs 1.5 lakh to Rs 2 lakh.”

Author
Kumar Shankar Roy

Kumar Shankar Roy is contributing editor with RupeeIQ. He can be contacted on contact@rupeeiq.com