The rebate under section 87A of Income tax Act 1961, which is available since assessment year 2014-15 is raised to ₹12,500 from existing ₹2,500. The amount of rebate is 100% of income tax payable on the total taxable income of up to ₹5 lakh.
A rebate is the amount of tax the tax payer is not liable to pay. Total taxable income or net taxable income is the income after taking into account deductions.
So in next fiscal, if an assessee has an income of up to ₹5 lakh in the financial year, she is allowed to claim the entire tax payable as tax rebate. For instance, if an assessee is having a gross income of ₹6.5 lakh for the financial year 2019-20, and makes an investment of ₹1.5 lakh under section 80C her net taxable income comes down to ₹5 lakh, on which her tax liability would be ₹12,500 (5% of ₹2.5 lakh) excluding cess (income upto ₹2.5 lakh is exempt from tax).
However, as her income is up to Rs5 lakh in the particular financial year, she is liable to claim a rebate of ₹12,500 and thus her net tax payable would be zero. This means while the tax payer is still liable to file her returns, the tax payable is zero.
Around 3 Cr Middle Class Taxpayers Will Get Tax Exemption
“So people earning up to Rs 6.5 lakh may not have to pay tax if they make investments in specified savings. This will provide tax benefit of Rs 18,500 crore to 3 crore people,” he added. Around 3 crore middle class taxpayers will get tax exemption due to this measure, the finance minster said.
TDS Threshold On Rental Income Raised From 1.8 Lakh To 2.4 Lakh Rupees
TDS threshold on interest on bank and post office deposits raised from 10,000 to 40,000 rupees. TDS threshold on rental income raised from 1.8 lakh to 2.4 lakh rupees, said Piyush Goyal at interim budget 2019.