Income Tax Slabs for AY 2019-2020 To Change?

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Every earning individual contributes to the growth of a nation by paying Income Tax. Complying with the legal rules by filing Income Tax Return annually is the duty of every responsible individual and entity in the country. The income tax amount payable by an individual is determined by the Income Tax Slabs category he/she falls in. Decided in the national budget, Income Tax Slabs may or may not change for every financial year. Predetermined tax rates based on which the income of an individual is assessed are known as Income Tax Slabs.

After the same Income Tax Slabs for the past few financial years, the expectations are high for the coming year. Changes in income tax slabs are the most anticipated among all segments of Budget 2019. An interim budget announced by the Finance Minister Mr. Piyush Goyal on 1st February 2019 presents some hope for the lower middle-class earning individuals. Income Tax exemption for those having an annual income less than or equal to INR 5 Lakh is the biggest move among all budget changes. Another considerable leap is the extension in the limit of the standard deduction from INR 40,000 to INR 50,000. Other Income Tax Slabs changes are yet to be announced.

The Categorization of Income Tax Slabs

Income tax is payable by individuals as well as businesses. Income Tax Slabs categorization is based on age, annual income, and income type. Taxpayers in India fall in any one of the following categories.

  • Individual earners or Hindu Undivided Family aged less than 60 years
  • Senior Citizens aged 60 years to 80 years
  • Senior Citizens older than 80 years
  • Domestic firms/companies.

Major Income Tax Changes Anticipated in FY 2019-2020

There are several minor changes proposed in the current AY-2019-2020. The new changes will be effective from 1st April 2020.

Income Tax Slabs:

There is no Income Tax Slabs change for the coming year. Taxpayers with annual income exceeding INR 5 lakhs will continue to be taxed under 5% Income Tax Slabs rate for income above INR 2, 50,000 to INR 5 lakhs.

Deductions:

Deductions of all Income Tax Slabs will remain the same.

Standard Deduction for Salaried Employees:

Income Tax Slabs for Salaried employees are unchanged, but they can get benefit from the proposed increase in the standard deduction limit from INR40, 000 to INR 50,000.

Income Tax Rebate:

Individuals having an annual income of INR 5 Lakh or less can enjoy a maximum rebate of INR 12,500 under section 87A of Income Tax Act, 1961. This rebate is available under Section 87A. However, the rate of income tax and income tax slabs are not changed for the Financial Year 2019 - 20.

TDS Cut Off Rate:

Now individual bank and post-office customers can benefit from the increase in TDS cut off for interest gained. TDS will be levied on interests over INR 40,000 as opposed to INR 10,000 previously. TDS on rent limit will also be raised from INR 1, 80, 000 to INR 2, 40, 000.

Rental From 2nd Property:

An amendment of Notional Rental Income under Section 23(4) of the IT Act is proposed. This will allow the income from second house property not to be charged in Income Tax.

Period of Exemption for Tax on Notional Rent

An amendment of Section 23(5) of the IT Act, 1961 is proposed for FY-2019-2020. This will extend the period of extension from taxation on notional rent and unsold catalogs to 2 years as opposed to 1 year in FY-2018-2019. The period will start from the end of the project completion period.

Aggregate Deduction on Borrowed Capital

As per Section 24 of the IT Act, a maximum aggregate deduction of INR 2 lakhs is applicable for the interest payable on borrowed procurement, repair, renovation or construction. For FY-2018-2019, the same is INR 30,000 for reconstruction and INR 2 lakhs for purchase or construction.

Extension of Deduction on 2 Houses

An amendment is proposed in Section 54 which will extend the deductible on construction or acquisition of 2 houses in India only if the net capital gain does not exceed INR 2 Crore. This deduction can be availed once in a lifetime only.

Affordable Housing Scheme Benefit

There is a proposal to extend the benefits of Section 80-IBA for one more year. This will be beneficial for houses acquired under the affordable housing scheme.

Other key improvements visualized for all Income Tax Slabs for AY 2020-2021 is the 100% automation of Income Tax Assessment in the next two years Income Tax Return will be processed within 24 hours, saving time and efforts of Indian taxpayers.

Budget 2018 had increased income tax cess from 3% to 4% for all the taxpayers. This is directly proportional to the increase in the tax liability of the highest Income Tax Slabs by INR 2, 625. The tax increase is INR 1,125 and INR 125 for middle- and lowest-Income Tax Slabs respectively. The same is anticipated to continue in for AY 2019-2020.

Income Tax Slabs Chart for FY 2019-2020 (AY 2020-2021)

Here are the latest Income Tax Slabs applicable for the current financial year. Once shown the green flag in parliament, the latest Income Tax Slabs rate will be applicable for the financial year 2019-2020 too.

Income Tax Slabs for Individual Residents/HUF

Income Tax Slabs to be taxed

Tax Rates

Rate of Cess

When total annual income equal to INR 2,50,000

-

-

On total annual earning above INR 2,50,000 and below INR 5,00,000

5%

4%

On total annual earning over INR 5,00,001, not exceeding INR 10,00,000

INR 12,500 + 20% on annual income of INR 5,00,000

4%

On total annual earning exceeding INR 10,00,001

INR 1,12,500 + 30% on annual income of INR 10,00,000

4%

Income Tax Slabs Applicable for Individual Residents/HUF Aged 60-80 Years

Income Tax Slabs to be taxed

Tax Rates

Rate of Cess

Yearly financial gain limited to INR3,00,000

Nil

Nil

Yearly financial gain between 3 lakhs and five lakhs

5% on income above three lakhs

4%

Yearly financial gain from a lower limit of INR 5,00,001 to an upper limit of INR 10,00,000

INR 10,000 plus 20% of the over five lakhs.

4%

 

Income from INR 10,00,001 and above per annum

INR 1,10,000 plus 30% of income in excess of 10 lakhs

4%


Income Tax Slabs Applicable for Individual Residents Aged 80 Years and Above

Income Tax Slabs to be taxed

Tax Rates

Rate of Cess

Total annual income up to 5 lakhs

Nil

Nil

Yearly Income between 5 and ten lakhs

20% of the income in excess of 5 lakhs.

4%

 

Income exceeding INR10,00,000

1 lakh plus 30% in excess of INR 10 lakhs

4%

Tax Slabs for Domestic Companies

Gross Turnover

Tax Rates

Rate of Cess

Previous year gross turnover up to INR 250 crores

25%

4% corporate tax

The gross turnover of the previous year above INR 250 crores

30%

4% corporate tax

A surcharge is calculated at the rate of 7% in cases where the total income lies between INR 1 Crore to INR 10 crore. If the total income is beyond INR 10 crore, then the taxpayer will have to pay a surcharge of 12% of the income tax.

Any resident individual whose yearly income is not more than INR 3, 50,000 is eligible for Tax rebate under Section 87A. According to this, the rebate amount is either 100% of the income tax or INR 2,500, whichever is lower. This deduction is calculated before application of cess rates.

The scenario in FY 2019-2020

If the interim budget of 2019 gets approved in the parliament, the tax liability will change in the upcoming financial year. Although there is no change in the tax slabs whatsoever, other significant changes have been proposed. Although Tax Slabs rates remain unchanged, changes in Section 87A of IT Act, 1961 is a significant step towards providing relief to the lower income group in the country.

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