Budget 2019: Individuals with income of Rs 5 lakh will not be required to pay any income tax.
In a big relief to the middle income category the Finance Minister Piyush Goyal has announced that individuals with taxable income of up to Rs 5 lakh will not be required to pay any tax in the financial year commencing April 1, 2019.
While the finance minister did not tweak the tax slabs, he increased the limit of rebate from existing Rs 2,500 on taxable income of up to Rs 3.5 lakh to Rs 12,500 on taxable income of up to Rs 5 lakh under Section 87A. As a result, individuals with income of Rs 5 lakh will not be required to pay any income tax. “Individual taxpayers having taxable annual income up to Rs 5 lakhs will get full tax rebate and therefore will not be required to pay any income tax,” said Goyal in his speech. He further added that this will provide tax benefit of Rs 18,500 crore to an estimated 3 crore middle class taxpayers comprising self employed, small business, small traders, salary earners, pensioners and senior citizens.
The finance bill said that in Section 87A of the Income Tax Act with effect from 1st April 2020, “for the words three hundred fifty thousand, the words five hundred thousand shall be substituted…. For the words two thousand and five hundred, the words twelve thousand and five hundred shall be substituted.”
Since the government did not tweak the tax slab, the benefit will not be available to individuals whose taxable income is over Rs 5 lakh. Thus all taxpayers with taxable income in excess of Rs 5 lakh will continue to pay tax as per the existing tax slab and their taxable income between Rs 2.5 lakh and Rs 5 lakh will be taxed at 5 per cent. The Finance Minister further specified that even persons with gross income of over 5 lakh will not be required to pay any tax as they can claim the available deductions on investments in provident funds, specified savings, insurance, interest on home loan, NPS contributions, medical insurance and medical expenditure on senior citizens.
So an individual earning up to Rs 10 lakh as gross income can also benefit from the changes made by the government and if they avail of all the deductions available on home loan interest payment, medical insurance and benefits under section 80C among others.
While individuals with high taxable income have not received much from the government other than marginal benefits on account of increase in standard deduction limit to Rs 50,000 and increase in TDS threshold on interest earned on bank/post office deposits to Rs 40,000, financial planners say that they would be glad to see that no additional tax, cess of change in surcharge that has been imposed this year.
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