The Central government presented (perhaps its last) interim budget last week. Finance Minister, Piyush Goyal proposed a number of sops to the salaried class as well as the farmers of the country. The increase in the income tax limit along with Standard Deduction amount is the talk of the town, with several people still having questions in their mind about their actual tax liability. The article explains the same in simple language.
How to calculate income tax after budget
Announcement of a full tax rebate on an annual income up to Rs. 5 lakh to Rs. 10000 hike in standard deduction ( total Rs. 40000) applicable to the salaried and pensioners, the Budget 2019 proposes few key changes to income tax laws.
When the new income tax rules come into effect, that is, from Assessment Year 2020-21, individual assessees’ tax pay-out will change accordingly.
Let us now see how the fresh calculations will be !!
| New tax calculation examples Assessment Year 2020-21 | ||||
| Net Taxable annual income in rupees (i.e. after adjusting deductions) | 3,50,000 | 4,00,000 | 5,00,000 | 10,00,000 |
| Tax | 5,000 (@ 5% on 1,00,000) | 7,500 (@ 5% on 1,50,000) | 12,500 (@ 5% on 2,50,000) | 1,12,500 (@5% on 2,50,000, 20% on 5,00,000) |
| Rebate under Section 87A of I-T Act | 5,000 | 7,500 | 12,500 | NA |
| Tax liability | 0 | 0 | 0 | 1,12,500 |
| Cess @ 4% | 0 | 0 | 0 | 4,500 |
| Tax payable (after cess) | 0 | 0 | 0 | 1,17,000 |
| Assessment Year 2019-20 | ||||
| Taxable income | 3,50,000 | 4,00,000 | 5,00,000 | 10,00,000 |
| Tax | 5,000 | 7,500 | 12,500 | 1,12,500 |
| Rebate | 2,500 | NA | NA | NA |
| Balance Tax | 2,500 | 7,500 | 12,500 | 1,12,500 |
| Cess | 100 | 300 | 500 | 4,500 |
| Tax payable | 2,600 | 7,800 | 13,000 | 1,17,000 |