October 26, 2020

Itax Software

Income Tax Software

Budget 2019 – How a salaried person with income up to Rs 7.75 lakh can now pay zero tax

Going
by the Budget 2019 proposals, a salaried individual with gross total
income up to Rs 7.75 lakh can invest in various tax saving avenues and
avail of different deductions to reduce taxable income to Rs 5 lakh and
consequently pay no tax for FY2019-20. Such a person would be saving tax
of Rs 15080 compared to tax payable in current FY 2018-19, according to
EY analysis.



Here’s how. Say your gross total income for the financial year 2019-20 is Rs 7.75 lakh.

First,
you can claim the standard deduction of Rs 50,000 for FY 2019-20 as
against Rs 40,000 available for the current financial year as Budget
2019 proposes to hike this standard deduction by Rs 10,000. 
You
can invest Rs 1.5 lakh under section 80C in any of the eligible tax
saving avenues of PPF, EPF etc or use tuition fees paid for children to
claim a deduction of the same amount from the gross total income. This
can be claimed as a deduction from your gross income of Rs 7.75 lakh
reducing it to Rs 6.25 lakh 

Next, invest Rs 50,000 under section 80CCD (1B) in the National Pension Scheme 

Next,
pay Rs 25,000 premium for a medical insurance policy(is) for yourself
and family and claim a deduction of the same amount from gross total
income under section 80D. This deduction can be higher if you also pay a
medical insurance premium for your senior citizen parents 

Particulars                  Existing F.Y. 2018-19                     Post Budget F.Y. 2019-20
Gross Salary =                        7,75,000                                           7,75,000 
Less: Standard deduction=       (40,000)                                          (50,000) 

Net salary                                 =7,35,000                                       7,25,000 
Income from other sources      =10,000                                          10,000 

Gross Taxable Income           =7,45,000                                       7,35,000 

Deduction under Section 80C   =(1,50,000)                                           (1,50,000) 
Deduction under Section 80CCD(1B) = (50,000)                                  (50,000) 

Deduction under Section 80D=    (25,000)                                             (25,000) 

Deduction under Section 80TTA=   (10,000)                                          (10,000) 
Income under the head salary=    5,10,000                                             5,00,000 
Income Tax =                                     14,500                                             12,500 
Less: Rebate under section 87A      ——–                                               (12,500) 
Total tax payable after Rebate=      14,500                                                ——-
 Surcharge @10% / 15%=               ——–                                                ——–
Total tax payable after surcharge=  14,500                                              ——–
Education Cess @ 4%=                    580                                                  ——–
Total tax, surcharge and education cess =15,080                                    ——–

Difference – extra tax payable=                   (15,080)                               ——–
EY
Analysis: Salaried taxpayer claiming full benefit of Section 80C, 80D
for self and family and 80CCD(1B) with a gross salary of INR 7.75 lacs
will not be required to pay any tax and will save Rs. 15,080 /-

Assuming
you have other interest income up to Rs 10,000. This too can be
nullified by claiming a deduction of maximum Rs 10,000 under section
80TTA. 

After
claiming all the above your gross total income can be reduced to a
taxable income of Rs 5 lakh which is effectively tax exempt. 

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