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Income Tax Limit Relaxation a major highlight of Budget 2019; Plan your savings for next year!

By Nivesh Gyan   7 February

Category: Save Tax

Income Tax Limit Relaxation a major highlight of Budget 2019

 

The interim budget presented by current government was on expected lines, where they tried to give benefits to large segments of population keeping an eye on the upcoming general elections, while trying to maintain fiscal prudence. Government has tried to fulfill its long standing promise of relaxing income tax limits.

This will result in significant savings for income upto 9 lakh per annum. We have illustrated the savings in the tables below.

 

We strongly recommend you to plan a regular investment like SIP out of these savings to build a healthy corpus for your long term goals. It is very easy to spend the money but difficult to save and invest. But imagine if these tax relaxations were not announced. You would have still managed. So why not try to save and invest!

 

Besides, the budget also made important announcements that would benefit farmers and unorganized workers. Markets should take positive cues from the budget. However, elections outcome will continue to weigh on it and volatility is likely to remain till May 2019.

No tax on income up to Rs 5 lakhs per annum: A big boon for middle class

 

Scenario 1
Annual Income @ ₹ 4.5 lakhs
Earlier
Post-Budget
Annual Income
₹ 4,50,000
₹ 4,50,000
Taxable income
₹ 4,50,000
₹ 4,50,000
Tax liability
₹ 10,000 (5% of ₹ 2,00,000)
₹ 0 (Zero)
Tax Savings
₹ 10,000

  

Scenario 2
Annual Income @ ₹ 6.5 lakhs
Earlier
Post-Budget
Annual Income
₹ 6,50,000
₹ 6,50,000
Less: Standard Deduction
₹ 40,000
₹ 50,000
Less: ELSS investment
₹ 1,50,000
Taxable income
₹ 6,10,000
₹ 4,50,000
Tax liability
₹ 12,500 (5% of 2,50,000)
+ ₹ 22,000 (20% of 1,10,000)
= ₹ 34,500
₹ 0 (Zero)
Tax Savings
₹ 34,500

  

Scenario 3
Annual Income @ ₹ 9 lakhs
Earlier
Post-Budget
Annual Income
₹ 9,00,000
₹ 9,00,000
Less: Standard Deduction
₹ 40,000
₹ 50,000
Less: ELSS investment
₹ 1,50,000
Less: Home Loan Interest
₹ 2,00,000
Taxable income
₹ 8,60,000
₹ 5,00,000
Tax liability
₹ 12,500 (5% of 2,50,000)
+ ₹ 72,000 (20% of 3,60,000)
= ₹ 84,500
₹ 0 (Zero)
Tax Savings
₹ 84,500