Zero Income Tax – If your income is 5 Lakh per annum you need not to pay income tax. This is as per Union Budget 2019. It is perhaps the best gift to Indian tax payers, especially to salaried people. Not only that if you utilize section 80 C completely you can save income tax up to gross income of 6.5 Lakh. You need to make investment of 1.5 Lakh under various tax saving instrument under section 80 C. But, even if you have annual income of 10.25 Lakh you can enjoy zero income tax condition. In this post, we will look at Income Tax Slabs for FY 2019-20 (AY 2020-21). We will also discuss – How 10.25 Lakh annual income can be tax free?
Union Budget 2019 – Income Tax related changes
- Individuals with annual income up to Rs 5 lakh get full tax rebate under section 87A.
- Individuals with gross income up to Rs 6.5 lakh who have made investment in instrument covered under 80 C will not pay any tax.
- Standard deduction increased from Rs. 40,000 to Rs. 50,000.
- Anyone with taxable income above Rs. 5 lakhs will only get standard deduction benefit.
- Even salaried people who earn Rs. 10.25 lakhs annually can pay no tax.
Income Tax Slabs for FY 2019-20 (AY 2020-21)
As per Union Budget 2019, Income Tax Slab for FY 2019-20 (AY 2020-21) is given below.
|Income Tax Slabs & Rates FY 2019- 20, AY 2020-21|
|Income tax Slabs||General Category||Sr.Citizen||Very Sr. Citizen|
|Up to Rs. 2. 5 Lakh||NIL||NIL||NIL|
|Rs.2.5 Lakh to 3.0 Lakh||5%||NIL||NIL|
|Rs.3.0 Lakh to Rs.5.0 lakh||5%||5%||NIL|
|Rs.5.0 Lakh to Rs.10.0 Lakh||20%||20%||20%|
|Above 10.0 Lakh||30%||30%||30%|
After looking at Income Tax Slab for FY 2019-20 let’s look at How individual with 10.25 Lakh income can be tax free?
Zero Income Tax
How 10.25 Lakh annual income can be tax free?
Consider the below investments and deductions which will be reduced from your taxable income –
- Investment under sec 80C investment of up to Rs. 1.5 lakhs in a financial year. Section 80 C includes PF, PPF, Insurance premium, ELSS, Pension plan, FDs and NSCs. In order to get this tax benefit you need to make investment in any of the investment avenues mentioned here.
- Home Loan Interest 2 Lakh – If you have taken home loan you can take benefit of home loan interest component for tax saving.
- Section 80 CCD (1B) – 0.5 Lakh – You can save additional 0.5 Lakh for making investment in NPS. This is as per section 80 CCD.
- Medical insurance for Self/Spouse/Kids Under Section 80D – Rs. 25,000
- Medical insurance for Parents Under Section 80D – Rs. 50,000
So, if you make saving/investment as per deduction specified above you can enjoy tax free income up to 10.25 Lakh.
|Home Loan Interest||2,00,000|
|Investment under sec 80C (ELSS mutual funds, Provident Funds etc)||1,50,000|
|80D – Medical Insurance Self/Spouse/Kids||25000|
|80D – Mediclaim Parents||50000|
|NPS – Section 80CCD (1B)||50000|
|Total Tax Payable||NIL|
So, from above example you can save up to Rs.15,080 tax and make your income tax free if your annual income is 10.25 Lakh.
Note – Above calculation in indicative. Actual amount may differ from person to person.