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Planning your finances for 2019-20? Check your tax slab first!

It is that time of the year when taxes and investments become all the more relevant. It is the beginning of a new financial year. One of the more important things that you need to do is get updated about the tax slabs for the financial year of 2019-20 and begin planning out your tax saving investments. The income tax slabs for the coming financial year has very few deviations from that of the previous years. However, the recent tax-related announcements have raised several questions about the eligible tax slabs.

The interim budget 2019 made a monumental announcement that may help people who fall under the Rs 5 lakh income slab. This stirred quite some confusion as many people misinterpreted the announcement as a change in tax slab, when in reality, the government has suggested a tax rebate of Rs 12,500 for taxpayers with taxable income of up to Rs 5,00,000. The Union Budget 2019 has maintained the momentum created in the Interim Budget and made significant changes in taxation. Here are the tax slabs for the upcoming financial year –

For resident individuals below 60 years of age

For resident individuals between 60 to 80 years of age
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For resident individuals above 80 years of age
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For all Non-resident individuals (NRIs), the basic exemption limit is Rs 2.5 lakhs for one financial year, irrespective of their age. If the net income is more than Rs 50,00,000 but below Rs 1,00,00,000 a surcharge of 10% is levied before calculating the cess of 4%. If the net income is higher than Rs 1,00,00,000 then the surcharge levied is 15%.

The Finance Minister has revamped the surcharge for higher salary bracket of Rs 2 crore and more by a significant amount. While initially the surcharge on this bracket was at 15%, the proposed budget has suggested those earning between Rs 2 to Rs 5 crore to have a surcharge of 25% while those with an income above Rs 5 crore will have to bear 37% surcharge.

Cess on Income Tax
The income tax cess was increased from 3% to 4% in the last budget and it basically means that an additional tax of 4% will be levied on the tax calculated. For Example, if you have a total income of Rs 5,00,00 here is how the total income tax will be calculated. The initial Rs 2,50,000 will not be liable for any tax, and a 5% tax will be levied on the remaining Rs 2,50,000. This amounts to Rs 12,500. An additional 4% cess will also be calculated on this tax amount (Rs 12,500) and therefore the total tax payable will be Rs 13,000.

Understanding the Rebate
The union budget made a suggestion to exempt taxes of salaried employees with an income of up to Rs 5,00,000, in a monumental step that will benefit about 3 crore tax payers. People with an income of Rs 5,00,000, pay Rs 12,500 in annual taxes. However, this proposition offers a straight rebate of this amount, thereby reducing their income tax burden. In addition to this, people with a annual income of Rs 6,50,000 can also avail these benefits by investing Rs 1,50,000 in tax saving instruments under section 80 C. In other words, people with an income of Rs 6,50,000 can invest in instruments like PPF, insurances (term, life and health), GPF, etc to make his taxable Rs 5,00,00 and thereby enjoy this benefit.

In addition to this rebate scheme, the government also made amendments to tax deductions. From offering an additional tax deduction of Rs 1.5 lakhs on home loans for affordable houses costing below Rs 45 lakhs to proposing an income tax deduction of Rs 1.5 lakhs on interest paid on loans for the purchase of electric cars, the Union Budget 2019-20 has suggested notable changes.

Understanding this tax rebate scheme and whether it is applicable to you is one of the easiest ways to reduce our tax liability and increasing our annual gains. In addition to these gains, if we manage to squeeze out more investments, then people can also put their money in NPS schemes and health insurance schemes, etc, to add our tax savings. It also plays a crucial role in our financial planning. So let’s get started!

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