The income tax department will give a "straight rebate" of Rs 12,500 to people having an annual income of Rs 5 lakh from the beginning of next fiscal, thus making their tax liability zero, CBDT Chairman Sushil Chandra said Friday, explaining the proposal made in the Union Budget for 2019-20.
For people earning more than Rs 5 lakh annually, the "old" tax rates will continue. However, people having taxable income of Rs 6.5 lakh per annum too can avail "tax rebate" provided they invest Rs 1.5 lakh in specified investments such as PPF, General Provident Fund (GPF) and insurances, he said.
Explaining the nuances of the proposals announced by Finance Minister Piyush Goyal in his interim budget speech, Chandra said, "This (zero income tax) rebate is only for persons whose taxable income is Rs 5 lakh. If the return filed or taxable income is Rs 5 lakh, then their tax liability will be nil because we will be giving a rebate of the total tax which is due on Rs 5 lakh of taxable income."
"As per the present taxation rate, the tax liability up to Rs 5 lakh is Rs 12,500. So, we will give a rebate of Rs 12,500 straight so that everyone who is filing a return up to Rs 5 lakh of net income will absolutely be a tax exempt case. They will get a full rebate," Chandra told PTI in an interview.
Even after that, he added, if a person is earning Rs 6.5 lakh per annum, and he or she deposits Rs 1.5 lakh under 80C (section of I-T Act that deals with deductions) in PPF, GPF, insurance, then his taxable income becomes Rs 5 lakh though he is earning Rs 6.5 lakh.
"So, for such a person it will be a total rebate of tax liability," the top official of the income tax department said.
The Central Board of Direct Taxes (CBDT) frames policy for the I-T Department.
For those, he said, whose return of income or taxable return is more than Rs 5 lakh, the old slab of tax rates will continue.
"There is no change in that because this is an interim budget and it has been targeted that the small taxpayers, middle-class and lower middle-class taxpayers should have a certainty of their tax liability on April 1. I can tell you that this proposal (Rs 5 lakh income rebate) will be applicable from the coming financial year of April 1 after it is passed in this budget session of Parliament," Chandra said.
The CBDT boss said that Friday's budget had something for the salaried class of taxpayers too.
"The salaried employees will get an additional benefit of Rs 10,000 under standard deduction. This has been hiked from Rs 40,000 to Rs 50,000 in the budget," he said.
About 3 crore taxpayers will be benefitted from this enhanced standard deduction and revenue forgone for this will be about Rs 4,700 crore, he said.
Chandra added that the proposal of giving rebate in income tax to people earning up to Rs 5 lakh will benefit another three crore people and the revue forgone would be Rs 18,500 crore.
"Both of these rebates will be the income in the hands of the taxpayers and they will be able to used the money for productive purposes. As this was an interim budget, we had a very limited space and the target sectors were the middle-class and lower middle class," he said.
Want to make your startup journey smooth? YS Education brings a comprehensive Funding Course, where you also get a chance to pitch your business plan to top investors. Click here to know more.