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
Tax liability
0
0
0
112,500
Cess @ 4%
0
0
0
4,500
Tax payable (after cess)
0
0
0
117,000
Budget 2018 examples
Taxable income
350,000
400,000
500,000
1,000,000
Tax
5,000
7,500
12,500
112,500
Rebate
2,500
NA
NA
NA
Balance Tax
2,500
7,500
12,500
112,500
Cess
100
300
500
4,500
Tax payable
2,600
7,800
13,000
117,000
The government will announce its full-year budget for the current financial year on July 5, farm minister Narendra Tomar said in May.
