Want tax-free income of Rs 5 lakh in FY 2019-20? Check eligibility before Budget 2020

Want tax-free income of Rs 5 lakh in FY 2019-20? Check eligibility before Budget 2020

Budget 2020 Income Tax: Several reports suggest that the upcoming Budget on February 1 may see a rejig in personal income tax slabs. However, the benefit of such a rejig would be applicable while filing Income Tax Return (ITR) for FY 2020-21. For filing ITR of Financial Year 2019-20, the current rax slabs would apply. As per the current tax slabs and rules, a person having income up to Rs 5 lakh don’t need to pay any tax.

Last year, the Union government made income up to Rs 5 lakh effectively tax-free. CA Abhishek Soni, CEO, Tax2win, told FE Online, “If a taxpayer is having total income up to Rs.5,00,000 for FY 2019-20 then there will be no tax liability as the taxpayer will get the benefit of rebate u/s 87A on the tax payable up to Rs.12,500.” In case the total income is more than Rs.5,00,000, then the assessee will not be eligible to claim the benefit of rebate u/s 87A and total income will be taxed as per the slab rates applicable to him/her.

Sharing an example, Soni said, “Mr Win, being a normal citizen is having total income of Rs.5,25,000, then his tax liability including cess for FY 2019-20 shall be Rs.18,200. Since his total income is exceeding Rs.5,00,000, he is not eligible for rebate u/s 87A.”

How to claim Section 87A benefit

Soni said that to be eligible to claim rebate u/s 87A, Mr Win should claim deductions for specified investments or expenditures to the extent of Rs.25,000 to bring down his total income to Rs.5,00,000 which would result in no tax liability as rebate u/s 87A comes into the picture and reduce his tax liability to zero.

Taxpayers need to note that there was no change in the basic exemption limit in Budget 2019. Soni said that there is a misconception that the basic exemption limit has been increased to Rs.5,00,000. “This benefit is available only to those persons who have a total income up to Rs. 5,00,000. Normal slab rates will be applicable for the taxpayers who have total income exceeding Rs. 5,00,000,” he said.

Total income for the purpose of Section 87A means Gross Total Income – Deductions.

Source:- financialexpress