The income tax rebate has been revised by Budget 2019 and there is no tax on income up to Rs. 5,00,000. However, this benefit is available to only those whose income is equal to or less than Rs. 5,00,000.
This benefit is provided through the rebate available under section 87 A and not by amending the tax slab rates. It means if your total tax payable is lower than Rs.12,500, the amount will eligible for a rebate under Sec.87A.
Refer our Article Income-tax slab rates for Individuals for FY 2019-20 (AY 2020-21)
A summary of the Revised Income tax slab rates for FY 2019-20 (AY 2020-21)
| Income slabs | Individual aged (Aged below 60 years) | Senior citizens (Aged 60 years and above but below 80 years) | Super senior citizens (Aged 80 years and above) |
| Up to 2,50,000 | Nil | Nil | Nil |
| From 2,50,000 to 3,00,000 | 5% | Nil | Nil |
| From 3,00,000 to 5,00,000 | 5% | 5% | Nil |
| From 5,00,000 to 10,00,000 | 20% | 20% | 20% |
| Above 10,00,000 | 30% | 30% | 30% |
Please note that there is no change in the income-tax slab rates, if your income is higher than 5,00,000, then tax will be levied on income from between Rs. 2,50,000 to Rs. 5,00,000.However, if your income is Rs. 5,00,000 and less, only then your tax liability is zero.
Let’s explain you with an example
| Tax Rates and Slabs | Income of 5,00,000 | Income of 7,00,000 |
| Up to Rs. 2,50,000 | Nil | Nil |
| 2,50,000 to 5,00,000 (5%) | 12,500 | 12,500 |
| Above, 5,00,000(20%) | Nil | 40,000 |
| Rebate u/s 87A | (12,500) | Nil |
| Total Tax Payable | Nil | 52,500 |
You may notice that up to Rs.5,00,000, even though there is tax liability, due to revised limits of Sec.87A, your tax liability becomes zero.
However, if your total income is more than Rs.5,00,000 then you are not eligible to claim the deduction under Sec.87A. Hence, there will not be any benefit for those who are under higher tax bracket.
Points to note
- Individuals with income up to Rs. 5,00,000 will have no taxable income, however, tds will be deducted and you will have to claim a refund.
- To claim a refund and use the benefit it is compulsory to file the income-tax return.
- Do remember that the rebate should be applied to the total tax before adding the education cess (4%).
For other Budget Updates, read our Article Budget 2019 Highlights - 6 things you must know.