• Aman Jaluka
  • 30-Apr-2019

BUDGET 2019-20: WHY NO TAX UPTO 5LAKH (CLEAR YOUR CONFUSION)

Before we go deep inside and understand with  an example let us firstly know some important fact.

(1) SLAB RATE SPECIFIED BY GOVERNMENT ON ANNUAL INCOME FOR ONE FINANCIAL YEAR.                                                                                                                                                   

TOTAL INCOME RATE OF TAX
ON FIRST 2.5 LAKH NIL
BETWEEN 2.5 LAKH TO 5 LAKH                             5%
BETWEEN 5 LAKH TO 10 LAKH                           20%
ABOVE 10 LAKH                          30%

                                                                                                 

NOTE:  WE HAVE ASSUMED THAT INDIVIDUAL IS A PERSON NOT A COMPANY AND HE OR SHE IS BELOW 60 YEARS OF AGE.

(2) WHAT IS REBATE? 

REBATE IS THE RELIEF ON INCOME TAX WHICH WE GET FROM THE GOVERNMENT.

NOTE: IN PRE BUDGET REGIME THIS RELIEF CAN ONLY BE AVAILED BY PERSON HAVING INCOME NOT MORE THAN 3.5LAKH  AND IN POST BUDGET AN INDIVIDUAL PERSON NOT HAVING INCOME MORE THAN 5LAKH RUPEES.

SO WE CAN CLEARLY STATE FROM ABOVE LINE THAT IF INDIVISUAL PERSON HAVING MORE THAN 3.5 LAKH AND 5 LAKH ANNUAL INCOME IN ONE FINANCIAL YEAR, PRE BUDGET AND POST BUDGET RESPECTIVELY THAN HE CANNOT ENJOY THE RELIEF OFFERED BY GOVERNMENT .

NOW LET UNDERSTAND EVERYTHING WITH AN SIMPLE EXAMPLES

EXAMPLE 1   A PERSON HAVING ANNUAL INCOME OF 3LAKH RUPEES

INCOME PRE BUDGET POST BUDGET
UPTO 250000 NIL NIL
BETWEEN 2.5 LAKH TO 3 LAKH 2500 2500
(50000*5%)    
Total income 2500 2500
REBATE -2500 -2500
TOTAL TAX PAID TO GOVT NIL NIL

NOTE: IN THIS CASE RABATE IS ALLOWED BECAUSE OUR INCOME IS LESS THAN 3.5 LAH AND 5 LAKH IN  BOTH PRE  AND POST BUDGET RESPECTIVELY.

EXAMPLE 2  A PERSON HAVING ANNUAL INCOME OF 5LAKH RUPEES.

INCOME PRE BUDGET POST BUDGET
UPTO 2.5 LAKH NIL NIL
BETWEEN 2.5 LAKH TO 5 LAKH 12500 12500
(250000*5%)    
Total income 12500 12500
REBATE NIL 12500
(250000*5%)    
TOTAL TAX PAID TO GOVT 12500 NIL

NOTE: THE ABOVE 12500 IS EXCLUDING  Education Cess” and “Secondary and Higher Education Cess”

             IN PRE BUDGET NO REBATE BECAUSE INDIVISUAL INCOME IS MORE THAN 3.5 LAKH.

EXAMPLE 3 A PERSON HAVING ANNUAL INCOME OF 7.5 LAKH RUPEES.

INCOME PRE BUDGET POST BUDGET
UPTO 250000 NIL NIL
BETWEEN 2.5 LAKH TO 5 LAKH 12500 12500
(250000*5%)    
BETWEEN 5 LAKH TO 7.5 LAKH 50000 50000
(250000*20%)    
Total income 62500 62500
REBATE NIL NIL
TAX PAID TO GOVT. 62500 62500

 

NOTE:  THE ABOVE 62500 IS EXCLUDING  Education Cess” and “Secondary and Higher Education Cess”

            IN PRE BUDGET NO REBATE BECAUSE INDIVISUAL INCOME IS MORE THAN 3.5 LAKH AND IN POST BUDGET NO REBATE BECAUSE INDIVIDUAL INCOME IS MORE THAN 5LAKH.

 

SO WE CAN CONCLUDE BY SAYING THAT THERE IS NO CHANGE IN ANY SLAB RATE BUT THERE IS A INCREASE IN A REBATE AMOUNT. IF AN INDIVIDUAL IS HAVING INCOME UPTO 5LAKH THAN HE DOES NOT NEED TO PAY ANY INCOME TAX BUT IF IT EXCEED EVEN BY 1 RUPEES THAN ON WHOLE 5 LAKH  AND ONE RUPEES  HE HAVE TO PAY TAX.