Budget 2019 - No Change in basic Tax Exemption Limits

Budget 2019 - No Change in basic Tax Exemption Limits::

No Change in basic Tax Exemption Limits

NO CHANGE IN BASIC TAX EXEMPTION LIMITS

There is no change in basic tax exemption limits. The rebate (more on that in a bit) doesn’t mean taxpayers eligible for it doesn’t have to file tax returns. With these two misconceptions out of the way, here are the important personal finance changes the interim budget 2019 has introduced:

What Is This Rebate That Everyone’s Talking About? So far,

 At present if an individual’s annual taxable income was Rs 3.5 lakh this person was eligible for a concession of Rs 2,500. The concession has now been increased to Rs 12,500 and will be applicable for taxable income up to Rs 5 lakh. Here’s a simple illustration:

Ms. A’s Rebate Calculation for the f. y 2018-19

Annual Income: Rs 5 lakh

80C Investment (tax scheme): Rs 1.5 lakh

Taxable Income: Rs 3.5 lakh (Rs 5 lakh – Rs. 1.5 lakh)
Tax Slab Exemption: Rs 2.5 lakh 
Total Taxable Income: Rs 1 lakh (Rs 3.5 lakh –  Rs. 2.5 lakh)

Applicable Tax: 5 percent of Rs 1 lakh = Rs 5,000

Applying Rebate: Rs 5,000 – Rs 2,500 = Rs 2,500

Tax Payable by Ms. A: Rs 2,500

Ms. A’s Rebate Calculation for the f. y 2019-20 (after budget)

Annual Income: Rs 5 lakh

80C Investment (tax scheme): Rs 1.5 lakh
Taxable Income: Rs 3.5 lakh (Rs 5 lakh – Rs. 1.5 lakh)

Tax Slab Exemption: Rs 2.5 lakh

Total Taxable Income: Rs 1 lakh (Rs 3.5 lakh – Rs. 2.5 lakh)

Applicable Tax: 5 percent of Rs 1 lakh = Rs 5,000

Applying Rebate: Rs 5,000 – Rs 5,000 = 0 (Total rebate is 12,500/-)

Tax Payable by Ms. A: Nil

If Ms. A’s annual income increased from 5 lakh to 6.5 lakh than how to calculate rebate.

Annual Income: Rs 6.5 lakh

80C Investment (tax scheme): Rs 1.5 lakh
Taxable Income: Rs 5 lakh (Rs 6.5 lakh – Rs 1.5 lakh)

Tax Slab Exemption: Rs 2.5 lakh

Total Taxable Income: Rs 2.5 lakh (Rs 5 lakh – Rs. 2.5 lakh)

Applicable Tax: 5 percent of Rs 2.5 lakh = Rs 12,500

Applying Rebate: Rs 12,500 – Rs 12,500 = NIL

Tax Payable by Ms. A: NIL

Let assume If Ms. A done investment Rs. 1 lakh only or any amount lower than 1.5 lakh under section 80C than Tax will be

Annual Income: Rs 6.5 lakh

80C Investment (tax scheme): Rs 1 lakh
Total Taxable Income: Rs 5.5 lakh (Rs 6.5 lakh – Rs 1 lakh)

Tax Slab Exemption: Rs 2.5 lakh

Total Taxable Income: Rs 3 lakh (Rs 5.5 lakh – Rs. 2.5 lakh)

Applicable Tax: 5 % of Rs 2.5 lakh = Rs 12,500 (Tax @5% on income between 250001 to 500000)
Applicable Tax: 20% of Rs 0.5 lakh = Rs 10,000 (Tax @20% on income between 500001 to 1000000)

Applying Rebate: Nil

Tax Payable by Ms. A: Rs. 12,500+10,000=32,500/-

Ready for a slightly more complex calculation?

Let’s increase Ms. A’s annual income to Rs 9.25 lakh.

If A exhausts all the deductions available to an individual,

she still won’t have to pay any tax. Here is why and how

Annual Income: Rs 9.25 lakh

Section 80C Investments: Rs 1.5 lakh

NPS Investment: Rs 50,000

Mediclaim: Rs 50,000

Interest Deduction on Housing Loan: Rs 2 lakh

Taxable Income: Rs. 4.75 lakh (Rs 9.25 lakh – Rs 4.5 lakh)

Tax Slab Exemption: Rs 2.5 lakh 
Total Taxable Income: Rs. 2.25 lakh (Rs. 4.75 lakh - Rs. 2.5 lakh)
Applicable Tax: 5 percent of Rs 2.25 lakh = Rs 11,250

Applying Rebate of Rs 12,500

Tax Payable By Ms. A: NIL

 In short, what is this rebate: concession for certain category of individuals. 

Who does it benefit: "Anyone with taxable income up to Rs 5 lakh. If taxable income is above Rs 5 lakh, rebate won’t be applicable. And the individual will be taxed according to regular tax slab."