The Finance Bill 2019 proposes a full tax rebate on annual personal income up to Rs 5 lakh. This rebate is applicable only if taxable income (after available income tax deductions) stands below Rs 5 lakh in a year, say financial planners. The government however maintained status quo on income tax slabs. This translates into an income tax rebate of Rs 12,500 for individuals with an annual income of Rs 5 lakh, which the tax liability for such assessees will become nil.
Here are few examples shared by tax experts explaining the latest changes in income tax rules:
|Assessment year 2020-21 income tax calculation examples|
|Taxable annual income in rupees (after adjusting deductions)||3,50,000||4,00,000||5,00,000||10,00,000|
|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||1,17,000|
|Assessment year 2019-20 income tax examples|
The government also proposed to raise the standard deduction limit by 25 per cent to Rs 50,000. This means that in Assessment Year 2020-21, a fixed deduction of Rs 50,000 in taxable income will be applicable to employees and pensioners.
With the latest income tax changes, the government has said, even individuals with a gross income of Rs 6.5 lakh and above may not be required to pay any income tax if they make use of available tax deductions.