Finance Minister Sh Piyush Goyal has proposed in Budget 2019 to provide Full Tax Rebate u/s 87A for Individuals having Taxable Income upto Rs. 5 lac. Persons having investments of Rs. 1.5 lac will have a tax free income of Rs. 6.5 lac, which may further increase based on other available exemptions.
Individual taxpayers with annual taxable income up to Rs 5 lakh will get full tax rebate, however no change has been proposed in the tax rates/ slabs applicable for Individuals for FY 2019-20/ AY 2020-21.
Individual taxpayers having taxable annual income up to Rs. 5 lakhs will get full tax rebate and therefore will not be required to pay any income tax. As a result, even persons having gross income up to Rs. 6.50 lakhs may not be required to pay any income tax if they make investments in provident funds, specified savings, insurance etc. In fact, with additional deductions such as interest on home loan up to Rs. 2 lakh, interest on education loans, National Pension Scheme contributions, medical insurance, medical expenditure on senior citizens etc, persons having even higher income will not have to pay any tax. This will provide tax benefit of Rs. 18,500 crore to an estimated 3 crore middle class taxpayers comprising self employed, small business, small traders, salary earners, pensioners and senior citizens.
Presently, Section 87A of the Income Tax Act, 1961 provides for tax rebate (relief) of upto Rs. 2,500 to resident individuals having taxable income upto Rs. 3.5 lacs. In Budget 2019, the tax rebate u/s 87A is proposed to be increased to Rs. 12,500, i.e. for resident individuals having taxable income upto Rs. 5 lacs during FY 2019-20/ AY 2020-21.