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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:

ParticularsProposed income Proposed taxable income
Taxable income5,00,0005,10,000
Income tax12,50014,500
Less: tax rebate12,500Nil
Income tax payableNil14,500
Health and education cessNil580
Total tax payableNil15080
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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