New I-T limit could make Rs 9.75 L tax free

Table

Piyush Goyal’s move to raise the income tax exemption limit to Rs 5 lakh, which is calculated to win over middle-class voters, could theoretically mean that somebody earning Rs 9.75 lakh per annum need pay no tax.

Goyal said in his interim Budget speech that individuals having annual taxable income of up to Rs 5 lakh will not have to pay any income tax. This also covers those who have a higher gross income but are investing under Section 80C and claiming other benefits like Section 80D and Section 24 among others and having a taxable income below Rs 5 lakh. Taxpayers with taxable income above Rs 5 lakh will continue to pay tax as per the current tax slabs. There is no change in the slab rates in the interim Budget.

To understand how a person earning Rs 9.75 lakh income per annum could avoid tax altogether, see table.

It should be noted, of course, that if someone earns Rs 9.75 lakh, he is unlikely to invest fully in these schemes, and may not have a sizeable housing loan.

If an individual invests in the specified tax saving schemes of the government, the effective tax-free income limit will be Rs 6.5 lakh a year.

Tax assessees now not paying any tax will still need to file their tax returns unless their income is below the taxable threshold of Rs 2.5 lakh.

Further, standard deduction has been raised from Rs 40,000 to Rs 50,000 per year and increase of tax-free gratuity limit to Rs 30 lakh from the existing Rs 10 lakh. These measures will benefit 3-3.5 crore salaried individuals.

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New I-T limit could make Rs 9.75 L tax free

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