The hopes of the middle class have largely been dashed as the income tax slab rates remain unchanged. Nonetheless as a much awaited relief to young earners and ahead of the election due May, the government has declared complete rebate in income tax on taxable income up to Rs 5 lakh. This means the income tax exemption limit has been doubled from Rs. 2.5 lakh to Rs. 5 lakh now. So, individual income earners earning within Rs. 5 lakh, will no more come in the tax net.
So, from the move only individuals with taxable income upto Rs. 5 lakh will benefit.
"The Budget document also explained the rebate as, "Clause 8 of the Bill seeks to amend section 87A of the Income Tax Act to provide relief to the individual taxpayers by increasing the maximum amount of tax rebate to Rs 12,500 from existing Rs 2,500. The tax rebate shall now be admissible to taxpayers having total income up to Rs 5 lakh, instead of existing Rs 3.5 lakh."
Say for example now: If you had an income, say of Rs 5 lakhs, you ended paying Rs 12,500. Now, there is a rebate of Rs 12,500, which means you get the money back, if your income is below Rs 5 lakhs. This means, if you are in the 30 per cent tax bracket, you will have to pay the Rs 12,500, which you pay in the first bracket of 5 per cent.
In the current scenario, for individuals aged less than 60 years, income up to Rs. 2.5 lakh a year is exempt from tax. For senior citizens over 60 years but less than 80 years, the exemption limit is placed at Rs. 3 lakh , while it stands at Rs. 5 lakh in case of senior citizens.
Standard deduction which was introduced in the Union Budget 2018, the limit of it has been further increased from Rs. 40,000 to Rs. 50,000. The deduction of Rs 40,000 was introduced in lieu of medical reimbursement and transport allowance.
The benefit of standard deduction can be claimed not only by salaried class but also by pensioners who receive pension income from their past employers. Earlier, in the Union Budget 2005-06, P. Chidambaram withdrew the provision.
The move is expected to benefit as many as 3 crore taxpayers the benefit.
So, while the tax slab remains unchanged in respect of structure (to start at Rs. 2.5 lakh, and there is a change in the rebate limit. Also, the 80C limit remains unchanged at Rs. 1.5 lakh.
The deduction for interest paid on housing loan for self-occupied properties will remain unchanged at Rs 2 lakh.
The move is aimed at maintaining the compliance while providing relief to a section who earns upto Rs. 5 lakh in a year.