Wait is over for middle class people because government of India announced big relief to individual paying income tax in BUDGET 2019.

Before Budget 2019:

1. As per current provision of section 87A of Income Tax Act 1961, a resident individual whose net income does not exceed Rs.3,50,000 can avail rebate of tax. It is deducted from income tax before calculating Health and Education cess. The amount of rebate is 100% of income tax or Rs.2500 whichever is less.

2. As per sec 16 of Income Tax Act 1961, standard deduction of Rs.40,000 was allowed to salaried employees in lieu of exemption in respect of Conveyance allowance of Rs.19,200 p.a. plus reimbursement of medical expenditure of Rs.15,000.

Proposed Amendment in Budget 2019:

1. As per clause 8 of section 87A of Income Tax Act 1961, relief to the individual tax payers has been increased the maximum amount of tax rebate to Rs.12,500 from existing Rs.2,500.

Now tax rebate shall now be admissible to taxpayer having total income up to Rs.5,00,000.

2. Standard deduction u/s 16 to salaried individual has been increased from Rs.40,000 to Rs.50,000

Let’s understand the above provision with an example:

Particulars BEFORE BUDGET 2019 AFTER BUDGET 2019
Amount(Rs) Amount(Rs) Amount(Rs) Amount(Rs)
Income from salary 10,00,000 10,00,000
Less: Standard Deduction u/s 16 (40,000) 9,60,000 (50,000) 9,50,000
Income under head house property (2,00,000) (2,00,000)
Deduction u/s 80C (1,50,000) (1,50,000)
Deduction u/s 80CCD (50,000) (50,000)
Deduction u/s 80D: self 25,000
Parents 25,000 (50,000) (50,000)
Net taxable Income   5,10,000   5,00,000
Tax payable 14,500 12,500
Rebate u/s 87A Nil (12,500)
Net Tax Payable   14,500   Nil

It can be seen that individual having income of 10,00,000 is not liable to pay any tax if the person make investment accordingly.

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June 2021