Today finance minister increased both the rebate and threshold for the rebate in the Interim Budget 2019. Earlier the rebate was ₹2,500 for net taxable income up to 3.5 lakhs, now the rebate will be up to ₹12,500 for net taxable income up to 5 lakhs.
But this does not mean only people with income up to ₹5,00,000 will not have to pay income tax. As the income tax act already provides various exemptions, the effect of the income tax due to this rebate will be much more.
It is important to note that the rebate is applicable for income after net of deductions. This means, even if your gross income is more than ₹5 lakhs, if it comes down to ₹5 lakhs or less after various deductions, you won’t have to pay any income tax, provided you are able to take the benefits of various subsections available under the section 80 of the Income Tax Act.
Let’s take the example of one individual with a monthly salaried income of ₹75,000.00.
|The annual income will be||₹9,00,000.00|
|From this, the following deductions are allowed|
|Interest on House Loan||₹2,00,000.00|
|Deductions under section 80C||₹1,50,000.00|
|Deduction under National Pension Scheme||₹50,000.00|
|Net Taxable Income||₹4,50,000.00|
As the net taxable income is less than ₹5 lakh, the section 87A rebate will be applicable, and there will be no tax payable on this income.