As the few hours are left for the Budget 2019-20 to be announced by Union Minister Nirmala Sitharaman, middle-income taxpayers are expecting that Modi government will bring some changes in the income tax slabs.
Earlier, in the interim budget that was presented before the Lok Sabha Elections 2019, Modi government announced major changes in regard to income tax slabs for the year 2019-20. In the interim budget 2019 government increased the income tax rebate to Rs 5 lakh per annum for all those who are below 60 years and while presenting this they also said that this will benefit around 3 crore people.
Also, the government increased the standard deduction for salaried persons from Rs 40,000-50,000. While TDS threshold on interest on bank and post office deposits was also raised from Rs 10,000-40,000.
This will be the first budget of the Modi government to be presented after returning to power and that too with the new finance minister Nirmala Sitharaman at 11 am today. With this, the expectations are either government will continue with these announcements or will provide more relaxations for income taxpayers.
How is income tax calculated?
The government has divided the income tax slabs and exemption limits based on age and residential. While various components are taken into account when the government calculates income tax.
The three major components are Gross Taxable Income, HRA (house rent allowance) exemption and Transport allowance.
HRA: It depends on the basic salary of individual earns. It also depends on where the individual is residing, for example, an individual is residing in a metropolitan city or tier-1 city the HRA equivalent comes to 50 per cent of your salary. Whereas for other cities it is 40 per cent of the salary.
Transport or Conveyance Allowance: It is a component part of a salary and is exempted from the income tax. As per the present rules, the maximum annual exemption is capped at Rs 19,200 and any amount over this will invite income tax.
Apart from basic deduction under Section 80C, an individual can also claim additional income tax benefits under Section 80D, Section 80E and 80CCD.
General Category Taxpayers
Those falling under the general category, are aged below 60 years and if your annual income is less than Rs 5 lakh then you won't have to pay income tax.
Whereas, if your income is between Rs 5,00,001-10 lakh, then you have to pay income tax of 20 per cent including additional health and education cess of 3 per cent.
While those earning above 10 lakh have to pay an income tax of 30 per cent including an additional 3 per cent health and education cess.
Senior citizens (60-80 years) will don't have to pay income tax if their income does not exceed Rs 5,00,000 after the new announcement. Whereas, those paying Rs 5,00,001-10,00,000 will have to pay income tax of 5 per cent including an additional 3 per cent health and education cess.
While those earning above Rs 10,00,000 will have to pay an income tax of 30 per cent including additional cess of 3 per cent.
Meanwhile, those who are super seniors (above 80 years) have to pay the same tax as above, The tax exemption threshold for super senior citizens is Rs 5,00,000.