After the announcements in Budget 2019, an individual earning up to Rs 7.85 lakh per year can end up not paying any tax, provided he invests in various instruments. He can save a tax of Rs 15,080.
New Delhi: Finance minister Piyush Goyal announced in its interim budget on Friday that individual taxpayers earning up to Rs 5 lakh will be exempt from paying income tax. This was coupled with an increase in the standard deduction from Rs 40,000 to Rs 50,000.
It was also announced that individuals with a gross income of up to Rs 6.5 lakh will not have to pay any tax if they invest in provident funds and prescribed equities. Essentially, the calculation is that an investment of Rs 1.5 lakh would bring down the annual income from Rs 6.5 lakh to Rs 5 lakh, which would then take the indivual out of the tax net.
However, an individual earning up to Rs 7.85 lakh per year can end up not paying any tax, provided he invests in various instruments. He can save a tax of Rs 15,080 as compared to the tax payable in the current financial year.
Let's say you earn Rs 7.75 lakh per annum.
To start off, Rs 50,000 gets reduced from your salary straightaway as standard deduction.
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Now you are left with Rs 7.25 lakh. You can now invest Rs 1.5 lakh under section 80C in instruments like EPF, PPF etc or use tuition fees paid for your children to claim a deduction of the same amount from the gross annual income.
This leaves you with Rs 5.75 lakh. Add to it investments of Rs 50,000 under section 80CCD (1B) in the National Pension Scheme and premium of Rs 25,000 for medical insurance policy(ies) for yourself and your family. You will be able to claim deductions of the same amount — that is Rs 75,000 — from the gross income.
Now you are left with Rs 5 lakh and will not be required to pay any tax, according to the new budget announcement.
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The deductions can be higher if medical insurance premium is also paid for senior citizen parents.
If you have other income amounting to Rs 10,000, this can also be wiped off your slate while calculating your tax and you can claim a deduction of a maximum of Rs 10,000 under section 80TTA. So even if your gross income at the start was Rs 7.85 lakh, you end up with Rs 5 lakh after all deductions, and is therefore moved out of the tax net.
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