A startling turn of events has recently taken us all by a gigantic shock, or rather a pleasant surprise, when the government announced that zero income tax will be required to be paid by individuals earning an income of less than five lakh rupees a year. Does that not sound like a generous and true offer? Indeed it does.
How did this happen so suddenly? As a major decision taken by the government, it must have been well-thought out. Let us see what was going on and how it came to be, in the Prime Minister’s Office.
When was this news announced? And what are all the terms and conditions?
This ground-breaking news was announced by the Bharat Janata Party (BJP), also known as the Modi government these days. It was made on February 1st, 2019, just a few days before the 2019 Parliamentary elections. Interim Finance Minister Piyush Goyal included this particularly exhilarating piece of news among many other items, most of which brought out a loud cheer from the citizens of our country.
Of course, the most unexpected and surprising part of the speech was definitely this relief for all those who earn less than 5 lakhs an annum. Things are already difficult to manage in the absence of money, for the world is now simply money-driven.
When their little income is also sucked away in the form of taxes, revenues, and what not, it increases the difficulty level of life and decreases the chances of survival. That is the reason why this initiative by the government has been so widely approved and favoured, all around India!
According to Piyush Goyal’s announcement, when closely heard, any individual whose annual income falls below Rs. 5 lakh will receive a full tax rebate under section 87A. A rebate is just another word for a tax refund. Of course, any individuals who earn an income of higher than five lakhs must pay the taxes according to the required slabs.
This seems a little unfair and it came as a big disappointment to those who were expecting a tweak in the income tax slabs. The only benefit for such individuals is the standard tax deduction, which have been increased from Rs. 40,000 to Rs. 50,000.
Some viewers has also commented on this as being foolish, seeing as a person who earns 5 lakhs a year will not have to pay taxes, but the person who earns 5 lakhs and 1 rupee a year, the one rupee being the deciding factor, must pay the allotted income tax.
While the bad side and the disadvantages of this plan cannot be completely hidden, I strongly feel that the advantages of this plan are more numerous and beneficial than disastrous. The condition applied is that although the individual does not have to pay the income tax slot, he or she still has to file the income tax returns annually.
Earlier, the tax rebate was only up to 2,500 rupees, for individuals earning less than 3 lakhs per annum. However, that has now been increased up to a rebate of 12,500 rupees. For individuals earning between Rs. 5,00,001 to Rs. 10,00,000, the income tax rate is fixed at 20 %.
How will it affect the citizens of India?
Before the application of this bill, only the citizens of the country who were earning less than two lakhs fifty thousand rupees were exempted from paying income tax.
There was a slightly higher advantage to senior citizens (between the ages of 60 to 80 years) who were exempted from paying taxes if their income was below three lakh rupees per annum. Meanwhile, super citizens, who are above 80 years of age, were completely exempted from taxes if their income is below 5 lakhs.
Of course, some people are now worried that due to the tax rebate for income of below 5 lakh rupees, people earning more than that will have to face a hike in taxes to make up for the lost money.
However, putting these fears at rest, Neeru Ahuja, a Partner at Deloitte, clearly stated that people with an annual income around Rs 7.5 lakh will have additional no tax liability even if all the previously mentioned benefits are added to the existing norms.
Needless to be stated, this rebate under Section 87A is applicable only to the resident individuals of India. Non-resident Indians cannot claim this tax rebate. It is however, necessary to mention, as done before, that even the individuals who are exempted from tax are still required to file the income tax returns in the tax department if his or her income exceeds the maximum exemption limit.
Any late filing of income tax return (ITR) would invite the late filing fees which amounts to Rs. 1000 as stated under Section 234F. This has been clearly stated in multiple places, and also corroborated by Naveen Wadhwa, DGM of the tax filing firm taxmann.com and Abhishek Soni, the CEO of the tax filing form tax2win.in.
This filing is necessary only if you are below the age of 60 years and your annual income is more than two point five lakh rupees.
Here are the steps and requirements in order to pay zero income tax in the financial year 2019-20:
- Declare your gross total income by filing your income tax returns on a timely basis.
- Your gross total income will be an estimate of your salary, your interest income from savings account and fixed deposits and so on.
- Then you can claim all your tax deductions as well as your tax breaks. These include your house rent allowance (HRA), the standard deduction, the deductions under Section 80C and 80D, the interest paid on housing loans, etc. Try to claim everything that you are applicable and eligible for.
- Once your tax deductions are complete, check if your income tax returns fall below 5 lakh rupees. If this is the case, you are finally eligible for the rebate under Section 87A.
Other points under the Budget Meeting
There were multiple points discussed, differing conclusions arrived at and various decisions made at the budget meet, as to be expected.
Another decision that stole the spotlight was the one that stated that farmers who own less than or up to five hectares of land will now get an additional income support of six thousand rupees a year. This is formally known as the Kisan plan and played a big role in Modi’s campaign for the 2019 Parliamentary elections.
In addition to this, all unorganised sector employees will now be getting a three thousand rupee pension every month as income support.
There was a lot of attention devoted to income tax relief. Here are some of the other points discussed at the meetings, relating to the income tax relief for the citizens of India.
- There is going to be a standard deduction from fifty thousand rupees to forty thousand rupees for the salaried class.
- Individuals with an annual income of less than or equal to six point five lakh rupees will not need to pay taxes if they make investments in provident funds and prescribed equities.
- The Capital gains tax exemption that is under Section 54 is going to be available for up to two crore rupees. These gain exemptions will be available on two or more housing properties.
- The income tax relief on the notional rent from unsold houses is going to be extended from the stipulated period of one year to a whole two years.
- Any interest income in post offices or in banks that falls below forty thousand rupees has been now made tax free.
On another note, there were several discussions about the Goods and Service Tax (GST) too. One major announcement is that a group of ministers is going to be kept aside to find out and suggest ways to reduce the GST for house buyers.
The government’s decision to allow the citizens earning an income of less than five lakhs to get a full tax rebate is indeed a generous one. It is certain that thousands of people across India are going to benefit from this new policy! Blessings will be showered down from the skies!