Budget 2019: Tax slab change or tax rebate?

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Budget 2019: Tax slab change or tax rebate?

In the big bang budget today, the Interim Finance Minister, Piyush Goyal announced one of the most speculated tax break i.e. tax exemption up to Rs 5 lakhs. Let us understand this provision as this is currently a topic of debate as to whether this is a slab change or a rebate.

  • Individual taxpayers having taxable annual income up to 5 lakhs to get a full tax rebate under section 87A (i.e. approx. Rs 12,500)  and therefore will not be required to pay any income tax.
  • At the same time, the FM also mentioned that ” for now the existing rates of income tax will continue for FY 2019-20″

To clarify, we would like to mention that Rebate under section 87A is provided to individuals earning an income below the specified limit. Hence, to claim this relief, the following conditions should be satisfied:

  • You must be a resident individual in India and
  • Your total income, less Deductions, (under Section 80) should be equal to or less than Rs. 5 lacs.

With respect to this provision, various questions arise:

Whether an individual earning Rs 4 lacs is not required to file the tax return next year as his income is not taxable?

No. The individual is required to file the income tax return as he falls under the taxable slab of Rs 2.5 lacs to Rs. 5 lacs. However, he/she will claim the Rebate for income under Rs 5 lacs and pay “Nil” tax or claim the refunds.

Whether an individual earning Rs 8 lacs can claim the relief under sec 87A and get tax benefit upto Rs 5 lacs?

No. The rebate is applicable only for the marginal income earners and hence if your income less deductions u/s 80 is more than Rs 5 lacs, you will get charged at the normal tax slabs.

What are the slab rates for FY 19-20?

Unless changed in the Full budget that will be done in May 2019, the slab rates will remain the same as those in FY 18-19.

Particulars Non-Senior citizen
Age Below 60 years
Upto Rs. 2.5 lakh Nil
2.5lakh to 5 lakh 5%
5 lakh to 10 lakh 20%
Above 10 lakh 30%
Particulars Senior Citizen
Age Between 60 to 80
Upto Rs. 3 lakh Nil
3 lakh to 5 lakh 5%
5 lakh to 10 lakh 20%
Above 10 lakh 30%
Particulars Super Senior Citizen
Age Above 80 years
Upto Rs. 5 lakh Nil
5 lakh to 10 lakh 20%
Above 10 lakh 30%

Will HUF earning Rs 5 lacs get the same relief?

No. The rebate of Rs 5 lacs is available only to “individual” taxpayers.

 

 


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About CA Ankita Khetan 164 Articles
Ankita is a Chartered Accountant in practice and holds a Diploma in IFRS (from ACCA, UK). She is also a Commerce PG and Certified Independent Director (from IICA). She holds a certification in Forex and Treasury Management. Her area of expertise is GST and Income tax. She is passionate about reading, writing, and sharing knowledge on areas related to finance and taxation.

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