Explained: Income Tax confusion on annual income over Rs 5 lakh
Budget 2019: Soon after Finance Minister Piyush Goyal made Income Tax-related announcements while presenting the Interim Budget 2019 in the Lok Sabha, claims were made that taxable income up to Rs 5 lakh has become tax-free. Even on television debates, experts were seen voicing differing opinions on who will benefit from the new proposals in the Interim Budget. Here's is an explainer that will help you understand why, or why not, you may not benefit from the latest announcements.
But first, what Goyal announced in his budget speech:
"Individual taxpayers having taxable annual income up to Rs 5 lakhs will get full tax rebate and therefore will not be required to pay any income tax."
"As a result, even persons having gross income up to Rs 6.50 lakhs may not be required to pay any income tax if they make investments in provident funds, specified savings, insurance etc."
"In fact, with additional deductions such as interest on home loan up to Rs 2 lakh, interest on education loans, National Pension Scheme contributions, medical insurance, medical expenditure on senior citizens etc, persons having even higher income will not have to pay any tax."
Goyal's proposal makes it clear that persons having taxable income up to Rs 5 lakh will not have to pay any income tax. The government has not made any change to the existing tax slabs. This means, if a person's taxable annual income is above Rs 5 lakh, then s/he will have to pay tax as per the existing tax slab.
Finance Bill 2019 mentions the following tax slabs for different categories of taxpayers:
*Source: Finance Bill 2019
It is clear from the above charts that the Income Tax department will tax persons earning taxable income over Rs 5 lakh per year. However, there are ways in which the taxable amount can be reduced. This will involve making investments in certain tax-saving schemes as well as claiming deductions on home and education loans etc.
SEBI-registered investment advisor Jitendra Solanki told Zee Business Online, "Hypothetically, income up to Rs 10 lakh can be made tax free. The tax-free provision comes from tax rebate. If you apply all deductions, taxable income may come down to Rs 5,00,000 which won't be taxed."
Investments, however, need to be planned wisely, so that the current financial needs are not compromised. The decision is yours!