On Friday 1, 2019 Finance Minister Piyush Goyal presented much awaited Interim Budget in Lok Sabha. One interesting point in the budget was that instead of giving straight exemption on income of upto Rs. 5,00,000, FM slightly twisted the situation by giving Rebate under section 87A. Let’s understand how:

Particulars Situation I  Situation II 
Income 5,00,000 5,00,100
Computaion of Tax
0-2,50,[email protected]% 0 0
2,50,000-5,00,000 @5% 12500 12500
5,00,001-500100 @20% 0 20
Rebate u/s 87A 12500 0
Net Tax 0 12520
Add: Cess @4% 0 501
Net Tax Liability 0 13021

From the above illustration, we can conclude that there is only rebate which is provided and there is no change in slab rate. Thus, if income is more than 5 lakh, assessee can not claim rebate u/s 87A and assessee will need to pay tax on income above Rs. 2,50,000.

Individual taxpayers having taxable annual income up to Rs 5 lakhs will get full tax rebate

Other Budget 2019 updates:

  1. For salaried persons, Standard Deduction is being raised from the current Rs.40,000 to Rs.50,000.
  2. TDS threshold on interest earned on bank/post office deposits is being raised from Rs.10,000 to Rs.40,000.
  3. TDS threshold for deduction of tax on rent is proposed to be increased from Rs.1,80,000 to Rs.2,40,000 for providing relief to small taxpayers.
  4. Section 54 benefit increased from one residential house to two residential house for a taxpayer having capital gains up to Rs. 2 Crore.
  5. Exemption from Income Tax on notional rent on second self occupied house property.
  6. Benefit of rollover of capital tax gains to be increased from investment in one residential house to that in two residential houses, for a taxpayer having capital gains up to 2 crore rupees; can be exercised once in a lifetime.
  7. Benefits under Sec 80(i)BA being extended for one more year for all housing projects approved till end of 2019-2020.
  8. Individuals with gross income up to 6.5 lakh rupees will not need to pay any tax if they make investments in provident funds and prescribed equities.

Author: C S Ekta Maheshwari is the Author of this article and is a Practicing Company Secretary. The Author can be reached at [email protected] 

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June 2021