After the budget announcement was made by Shri Piyush Goyal on 1st February 2019, many people were confused that do we really don’t need to pay any tax on income upto Rs. 5,00,000.
In this article let’s discuss it in short and take a look at the conclusion:
Shri Piyush Goyal in his speech said that all people earning upto Rs. 5 lakh will get a full tax rebate. He never said that no tax will be paid on income upto Rs. 5 lakh. He was just increasing the limit of rebate which people were already getting u/s 87A of the income tax act.
Let’s understand it with an example:
|Does it include any special income
|Yes. LTCG of 2,00,000 @20%
|Total Tax (This is before cess)
|How much rebate
|Net tax payable
I Hope above examples clear your doubt. What we understand from both situation is:
In Situation 2: Just by increase of Rs.10,000 in income our tax increase by Rs.14,500 so in the end after paying taxes you are earning less than who is earning Rs.5 lakh.
In situation 3: You don’t get the entire tax exempt for income upto Rs.5 lakh as the limit for rebate has been kept at Rs.12,500.
Now last query which many people have is if we are not paying tax, do we really need to file income tax return?
The answer is Yes, because that limit is decided by section 139 which says any person earning income above maximum limit not chargeable to tax i.e. Rs.2,50,000 will file his return of income. So even if you are not liable to pay tax but if you don’t file your income tax return you can be liable to pay penalty u/s 234F, which can range from anywhere between Rs.1,000 to Rs.10,000.
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