Download Automated Income Tax Master of Form 16 Part B for F.Y. 2019-20 With Income Tax Rules for FY 2019-20: Impact on your Financial Planning

In the Interim Budget presented on 1st February 2019, the Indian government has announced changes in the income tax rules for the financial year 2019-2020. These tax deduction rules are effective from April’19 onwards.


Highlights

There is no change in the income tax slab rate for the financial year 2019-20 (AY 2020-21).

The standard deduction of Rs. 40,000 has hiked up to Rs. 50,000 for salaried people and pensioners.

Taxpayers with taxable income up to 5,00,000 get full rebate under Section 87A. Rebate has been raised from Rs. 2,500 to Rs. 12,500.

Under Section 23, Notional rent is not applicable to a second home. A person can declare two of such houses as self-occupied and need not offer any notional rent for taxation purposes.

Long term capital gain by selling one residential property to buy two residential properties once in a lifetime is now allowed under Section 54 exemption.

TDS on interest from bank or post office deposits has been increased to Rs. 40,000, from the current limit of Rs. 10,000.

Threshold the limit for deduction of TDS in case of rent is increased to Rs. 2, 40,000 from existing Limit of Rs. 1,80,000.

Exemption limit for gratuity is increased from Rs. 20,00,000 to Rs. 30,00,000.

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Tax rates for Multiple Income Slabs (Individuals below 60 years, Senior and Super Senior Citizens)

Annual Income RangeTax Rates
(For taxpayers below 60 years of age)
Up to Rs. 2,50,000Nil
Rs. 2,50,000 to Rs. 5,00,0005% of amount above Rs. 2,50,000
Rs. 5,00,000 to Rs. 10,00,000Rs. 12,500 + 20% of the amount exceeding Rs. 5,00,000
Above Rs. 10,00,000Rs. 1,12,500 + 30% of the amount exceeding Rs. 10,00,000
# Taxable income up to 5 lakh gets 100% rebate under 87A.## Surcharge on taxable income from 50 lakh to 1 crore will be 10% of the regular tax and 15% on income above 1 crore.### 4% cess is applicable on total income tax. The “Education Cess” and “Secondary and Higher Education Cess” is replaced by “Health and Education Cess”.
Annual Income RangeTax Rates
Senior citizens
(60 to 80 years of age)
Super senior citizens
(More than 80 years of age)
Up to Rs. 3,00,000NilNil
Rs. 3,00,000 to Rs. 5,00,0005% of the amount above Rs. 3,00,000Nil
Rs. 5,00,000 to Rs. 10,00,000Rs. 10,000 + 20% of the amount above Rs. 5,00,00020% of the amount above Rs. 5,00,000
Above Rs. 10,00,000Rs. 1,10,000 + 30% of the amount above Rs. 10,00,000Rs. 1,00,000 + 30% of the amount above Rs. 10,00,000

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Standard Deduction

For middle class salaried people and pensioners, it is a relief with hike in standard deduction Rs. 50,000.

Earlier the standard deduction of Rs. 40,000 was proposed in Budget 2018, after replacing Rs. 15,000 and Rs. 19,200 as medical reimbursement and travel allowance. Now it has been hiked to Rs. 50,000 which means in AY 2020-21, all pensioners and salaried people would be eligible for a fixed deduction of fifty thousand.

Full Tax Rebate

The interim budget 2019 to provide a full tax rebate to individuals having a net taxable income up to Rs 5 lakh. The maximum tax rebate given under section 87A is increased to Rs. 12,500. Individuals taxable earning up to Rs. 5 lakh would pay zero tax.

TDS on Deposits

The higher limit on TDS (tax deducted at source) on interest from deposits held with bank or post office is increased to Rs. 40,000, from the current limit of Rs. 10,000. It means interest income on bank/post office deposits up to Rs. 40,000 will not be subject to TDS.

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Deduction Under 80TTA

Under section 80TTA (interest on saving account only), deduction remains same up to Rs. 10,000 for individuals and HUF (Hindu Undivided Family) except for senior citizens.

Tax Benefits for Senior Citizens

Under section 80TTB (interest on all kinds of deposits held in banks, cooperative banks and post offices) has been raised from Rs. 10,000 to Rs. 50,000 for all senior citizens over 60 years.

How to Calculate Tax Deduction Under 87A for Taxpayers Earning Rs 7 lakh or above?

Standard Deduction of Rs. 50,000 and Rs. 12,500 rebates will help middle-class salaried taxpayers to wave off their tax. Take examples to understand this:

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1.              Net taxable income is Rs. 7 lakh

Let’s assume that Mr. A whose age is below 60 years has taxable income is Rs. 7,00,000 per annum. The individual is eligible for a standard deduction of Rs 50,000 which makes taxable income as Rs. 6,50,000.

If the individual shows savings of worth Rs. 1.50 lakh under section 80C, net taxable income becomes 5 lakh.

The income tax calculates to be 12,500. As per the change in 87A, an individual gets a rebate of Rs. 12,500 on income up to 5 lakh, thus taxpayer will be liable to pay zero tax.

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Here is the breakup of tax calculation:

Gross total incomeRs. 7,00,000 per annum
Standard deduction (SD)Rs. 50,000
Exemption from savings under section 80CRs. 1,50,000
Gross taxable income – (SD + Exemption) = 7,00,000 – (50,000 + 1,50,000) = 5,00,000 = Net taxable income
Tax on total income5% of amount above Rs. 2,50,000 = Rs. 12,500
Rebate (under section 87A)Rs. 12,500
Tax to be paid0 (Nil)

2.              Gross taxable income is above Rs. 7 lakh

Let’s assume that Mr. B is a male below 60 years of age whose total income is Rs. 8,80,000 per annum. His tax deduction would be as follows:

When the gross taxable income of an individual is Rs. 8,80,000, the hike in the standard deduction would reduce taxable income to Rs. 8,30,000. Here is how the tax calculation would go:

Gross total incomeRs. 8,80,000 per annum
Standard deduction (SD)Rs. 50,000
Exemption under section 80CRs. 1,50,000
Exemption under section 80DRs. 25,000
Gross taxable income – (SD + Exemption) = Rs. 8,80,000 – (50,000 + 1,75,000) = Rs. 6,55,000
Net taxable incomeRs. 6,55,000
Rebate (under section 87A)NIL
Tax on total incomeWhere the total income exceeds Rs. 5,00,000 but does not exceeds Rs. 10,00,000Nil upto Rs. 2,50,000Rs. 12,500 plus 20% of the amount (6,55,000-5,00,000)= Rs. 12,500 + 20% of 1,55,000 = 43,500
Total TaxRs. 43,500
Add: 4% Health and Education CessRs. 1,740
Total Tax payableRs. 45,240

Hence, the income tax levy is Rs. 45,240 and the rebate on this amount is not eligible.

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