1. Individuals earning upto Rs 3 lakhs will now pay zero tax. Here’s How

Individuals earning upto Rs 3 lakhs will now pay zero tax. Here’s How

Even though you are earning upto Rs.3 lakh, you will now not be taxed under the I-T Act. Further, you are not required to make any investment to avail the tax benefit.After the budget being announced, there was some confusion among the individuals related to tax slabs.

By: | Updated: February 3, 2017 1:16 PM
individual, section 87A, tax slab, income tax act, new tax slab after budget, union budget, 300000,  earning Even though you are earning upto Rs.3 lakh, you will now not be taxed under the I-T Act. Further, you are not required to make any investment to avail the tax benefit.

Even though you are earning upto Rs.3 lakh, you will now not be taxed under the I-T Act. Further, you are not required to make any investment to avail the tax benefit.

After the budget being announced, there was some confusion among the individuals related to tax slabs. Although there has been no change in the slab but a rationalisation of rebate allowable under Section 87A has been amended under the I-T Act which will provide you with the tax benefit over additional Rs.50000.

In view of proposed rationalisation of tax rates for individuals in the income slab of Rs. 2,50,000 to Rs.5,00,000, it is proposed to amend section 87A so as to reduce the maximum amount of rebate available under this section from the existing Rs. 5000 to Rs.2500. It is also proposed to provide that this rebate shall be available to only resident individuals whose total income does not exceed Rs. 3,50,000.

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The existing provisions of section 87A providing for a rebate up to Rs. 5000 from the income-tax payable to a resident individual if his total income does not exceed Rs. 5,00,000 will be applicable till the current financial year. After that, the amendment made in the current budget will take effect from 1st April 2018 and will, accordingly, apply in relation to the assessment year 2018-19 and subsequent assessment years.

To understand this more clearly, let us assume that a person is earning a salary of Rs.300000 per annum and he has not done any investments. Now he wants to calculate his taxable income under the new slab:

New slab after budget

          Slab                          Rate
0 – Rs.2.5lakhs                     NIL
Rs.2.5lakhs to 5lakhs          5%
Rs.5lakhs to 10lakhs           20%
Rs.10lakhs & Above            30%

As per his income which is falling under the 2nd slab where he will be charged at 5% on the additional income of Rs.50000. The total tax will amount to Rs.2500 without applying rebate. As the income is below Rs.3.5lakhs, he is eligible for a rebate of Rs.2500 under the section 87A of I-T Act (As per the new amendment). The rebate is deducted from the taxable amount before applying the education cess to it. In the current scenario, the rebate and total tax get naturalised after the deduction (Rs.2500-Rs.2500) and hence, the net taxable income becomes zero.

tax benefit

This is how he will not be charged any tax under the new tax rate regime.

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It is to be noted that the rates of income-tax in the case of every individual or HUF or every association of persons or body of individuals, whether incorporated or not or every artificial juridical person are referred to in sub-clause (vii) of clause (31) of section 2 of the Act.

  1. M
    Murty
    Feb 3, 2017 at 1:08 pm
    Still Einstein cannot understand this!3,00,000 rupees per annum is 25000/- per month. Rent is 5000/-. Provisions : Rs.5000/-, Other expenses: Rs.5000/-, Emergency Fund: Rs.5000/- , Entertainment Rs.5000/-Where is Section 80C? : HRA calculation???10% Tax Slab???No savings.... wow! 97Lakh people fall under this category.
    Reply
    1. R
      Ravi
      Feb 5, 2017 at 2:07 pm
      Tax free income limit should be increased.
      Reply

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