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    Marginal Increase In Income Over Rs. 5 Lakh Will Lead You To Pay Higher Tax: This Is How?

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    While many have welcomed the rebate extended to up to Rs. 5 lakh income, as per experts in the tax space it is suggested that any marginal increase in income over this exemption limit of Rs. 5 lakh will make an individual to pay a higher tax more than the increase in income.

    Income Over Rs. 5 Lakh Will Lead You To Pay Higher Tax
     

    And this can be explained using an example:

    Say, as per the Interim Budget 2019, individuals with income up to Rs. 5 lakh will not be liable to pay any tax amount, but marginal increase in income over this value will result in greater tax outgo than the incremental increase in income.

    This is illustrated using the table below:

    Particulars Proposed income Proposed taxable income
    Taxable income 5,00,000 5,10,000
    Income tax 12,500 14,500
    Less: tax rebate 12,500 Nil
    Income tax payable Nil 14,500
    Health and education cess Nil 580
    Total tax payable Nil 15080
    Additional tax payable   15080

    So, where in such a case after claiming all the eligible deductions and exemptions, the increase in income is just by Rs. 10,000, taxpayer has to pay a higher amount by Rs. 5,080 i.e. total tax liability is of the order of Rs. 15,080 and this is inclusive of 4% cess.

    GoodReturns.in

    Read more about: interim budget 2019 income tax
    Story first published: Wednesday, February 20, 2019, 11:51 [IST]
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