Zero Income Tax – How 10.25 Lakh annual income can be tax free?

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?

income tax

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 SlabsGeneral CategorySr.CitizenVery Sr. Citizen
Up to Rs. 2. 5 LakhNILNILNIL
Rs.2.5 Lakh to 3.0 Lakh5%NILNIL
Rs.3.0 Lakh to Rs.5.0 lakh5%5%NIL
Rs.5.0 Lakh to Rs.10.0 Lakh20%20%20%
Above 10.0 Lakh30%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 –

  1. 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.
  2. Home Loan Interest 2 Lakh – If you have taken home loan you can take benefit of home loan interest component for tax saving.
  3. 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.
  4. Medical insurance for Self/Spouse/Kids Under Section 80D – Rs. 25,000
  5. 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.

ParticularsPost-Budget 2019
Annual Income10,25,000
Standard Deduction50000
Home Loan Interest2,00,000
Investment under sec 80C (ELSS mutual funds, Provident Funds etc)1,50,000
80D – Medical Insurance Self/Spouse/Kids25000
80D – Mediclaim Parents50000
NPS – Section 80CCD (1B)50000
Taxable Income5,00,000
Total Tax PayableNIL

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.

Article by Raviraj

Raviraj is the man behind moneyalpha.com. He is graduate in finance, engaged in blogging since 6 years. He is not affiliated with any financial product, service provider, agent or broker. The purpose of this blog is to spread financial awareness and help people in achieving excellence for money. Please note that the views expressed on this Blog/Comments are clarifications meant for reference and guidance of the readers to explore further on the topics. These should not be construed as investment advice or legal opinion.

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