Latest Income Tax Slab Rates FY 2019-20 / AY 2020-21

This article is based on limited available information, if required, the content will be edited/updated. Kindly note that these proposals may or may not be implemented by the next forming Union Govt

Income Tax Slab Rates for FY 2019-20 / AY 2020-21 | Budget 2019-20 Key Highlights

Latest Income Tax Slab Rates FY 2019-20

The income tax slabs & rates are categorized as below;

    Individual resident aged below 60 years.Senior Citizen (Individual resident who is of the age of 60 years or more but below the age of 80 years at any time  during the previous year) 

  Super Senior Citizen(Individual resident who is of the age of 80 years or more at any time during the previous year).

Latest Income Tax Slab Rates FY 2019-20 / AY 2020-21

Budget 2019-20Income Tax : Key Highlights 

Below are the latest Income Tax rate proposals that have been made in Budget 2019-20 ;

Income upto Rs 5,00,000 to be exempt from income tax. Individual taxpayers having taxable annual income up to Rs 5 lakhs will get full tax rebate (u/s 87A) and therefore will not be required to pay any income tax.So those with income up to Rs 5 lakh only.

  I believe that if your taxable income is more than Rs 5 Lakh, this tax rebate is not applicable. So, there is no change/impact for the tax assessees who fall under 20% or 30% Tax Slab Rate.Kindly note that there is no change in Tax Slab Rates.

    The current Standard Deduction of Rs 40,000                 for FY 2018-19 is proposed to be increased to Rs 50,000 for FY 2019-20.

   Proposal to not to deduct TDS of up to Rs 40,000 on interest income from Bank / Post office deposits (the current FY 2018-19 TDS threshold limit u/s 194A is Rs 10,000).Currently, income tax on notional rent is payable if one has more than one self-occupied house.

   No tax on notional rent on Second Self-occupied house has been proposed. 

    So, you can now hold 2 Self-occupied properties and don’t have to show the rental income from second SoP as notional rent.The benefit of rollover of capital gains under section 54 of the Income Tax Act will be increased from investment in one residential house to two residential houses for a tax payer having capital gains up to Rs 2 crore. This benefit can be availed once in a life time.

TDS threshold for home rent paid by non-individuals has been increased  from Rs 1.8 lakh to Rs 2.4lakh p.a.

All income tax returns to be processed within 24 hours and refunds to be issued simultaneouslyTax scrutiny will also now be done electronically and there will be no interaction between the tax authority and the taxpayer.  

Calculation of Income Tax for FY 2019-20/AY 2020-21 | Illustrations

Let’s now discuss some scenarios on ‘How to calculate the tax on our total income?’

Assessees who are in 30% Tax Slab and below 60 years of age

Let us say your net taxable income (after all deductions like Sec.80C and all) Rs.16,00,000.

Up to Rs.2,50,000-NIL

Rs.2,50,001 to Rs.5,00,000-Rs.12,500  @5%.

Rs.5,00,001 to Rs.10,00,000-Rs.1,00,000 @20%

Rs.10,00,001 and above (in this case Rs.16,00,000)=Rs.1,80,000 @30%.

So total tax will be Rs.12,500+Rs.1,00,000+Rs.1,80,000=Rs.2,92,500.

Assessees who are in 20% Tax Slab and below 60 years of age

Let us say your net taxable income (after all deductions like Sec.80C and all) Rs.8,00,000.

Up to Rs.2,50,000-NILRs.2,50,001 to Rs.5,00,000-Rs.12,500 @5%.

Rs.5,00,001 to Rs.8,00,000=Rs.60,000 @20%

Therefore, the total tax will be Rs.12,500+Rs.40,000=Rs.72,500.

Assessees who are in the lowest Tax Slab and below 60 years of age

Let us say your income is Rs.4,00,000

Up to Rs.2,50,000-NILRs.2,50,001 to Rs.4,00,000-Rs.7,500 @5%

.However, using Sec.87A of IT Act, your tax liability will be ZERO.

An individual who is resident Indian and whose total taxable income does not exceed Rs. 5,00,000 is entitled to claim rebate under section 87A of up to Rs.12,500 (w.e.f AY 2020-20).

Its just a rebate

Those who are total earning upto 5 lakhs no tax

And

those One who is earning

 5,05,000, he has to pay tax on

full income exceeding. 2,50,000

Call me for your tax saving

K.Dhamodharan M.Com.,LL.B.,HDCM
Financial Counsellor
73582 10672

How to save income tax through your family members? What you must know

How to save income tax through your family members? What you must know

Saving tax through family! Surprised! Yes, we can save tax through our family members, i.e., parents, major children and wife. To save tax through family members we need to invest in ways that our tax burden shifts to our family members and we can take the benefit of income tax slabs. Saving tax through family means not only saving in tax but also means higher post-tax returns on your investment.
Here is how we can save tax through our family members.

Save tax through parents

You can save tax through parents as well as through parents-in-law. To achieve this goal, you need to give away a portion of your funds, either as a gift or a loan, to your parents as well as your parents-in-law so that in years to follow your income tax burden becomes lighter as the income on funds transferred by you to them would bring in income which would be taxed in their hands.

Let’s assume that both your parents are senior citizens. Here’s how you go about it. Income tax deductions allow senior citizens a tax-free income of Rs 3 lakh. To exhaust this limit, say, you gift `28 lakh to each parent in cash. Of this, both can individually put Rs  15 lakh in a senior citizens savings scheme that earns a return of 8.3% and pays interest every quarter. Each will get yearly interest of nearly `1.2 lakh. If they invest the remaining `13 lakh each in the State Bank of India’s (SBI) fixed deposit (FD) of eight years (at an interest rate of 7.25%) that pays interest each quarter, it will fetch them each an income of nearly `0.95 lakh annually. That means your parents have individually earned `.215 lakh each year. With the tax-free limit at `3 lakh they don’t even need to file tax returns.

Same planning can be done for parents in laws.

Save tax through major children All your adult children are as solid as a rock to help you save income tax. After October 1, 1998, the provisions relating to gift tax have ceased to exist. Now you are free to gift away your money to your children without attracting gift tax. Investment made by major children out of the gift received by you will be taxed in the hands of your children. If for any reason you are inclined to make gifts to your major children, then you may give interest-free loans to your adult children so as to legally reduce your taxable income.

It is lawful to grant interest-free loans to adult children from your own funds.

Save tax through your wife

Married taxpayers can make a substantial saving of income tax by setting up two separate independent income tax files, one for the husband and another for the wife. If your wife is already filing Income Tax Return then she may continue filing the return with her new surname (in case she has changed it) and address or with her old surname and address. However, care should be taken to ensure that no gift or transfer from husband is made to the wife as clubbing provision may get attracted.

Don’t forget to mention these small things while filing income tax returns

Don’t forget to mention these small things while filing income tax returns

It is July. The first quarter of the financial year has come to an end and appraisals too are behind for most of salaried employees. Most of you must have got your Form 16 from your employers. That paves the way for filing of income tax returns as the July 31 deadline is fast approaching.

Income tax return filing is an important act and has its own benefits if you do it before the deadline. Here are a few seemingly small things that all salaried individuals should take care of while filing their income.

Check your Form 26AS

 

This is the buzzword and do not miss it. “Tax authorities match the entries in Form 26AS with your submissions,” points out Akhil Chandna, Director, Grant Thornton India LLP. “You must check your Form 26AS online and ensure that there are not any mismatches between your income tax returns and the contents of Form 26AS.”

 Check the year and format

“You must be careful while filing your income tax returns. Do confirm if you are filing for the correct assessment year and you have chosen the right format,” says Balwant Jain. There are multiple formats for different types of tax payers. Also these formats change over the years. If you are filing income tax returns for multiple years, you have to be doubly careful.

Mutual fund investments

Mutual fund investments are catching up big time and there are many first time investors in India. Though there was no long-term capital gains on equity funds till last financial year, the taxes on short-term capital gains on both equity and non-equity funds were payable. So was the case with long-term capital gains on non-equity funds. That necessitates you to run through your mutual fund statements and your bank statements. “If you have opted for systematic investment plans (SIP) or systematic withdrawal plans (SWP), you will have to compute taxes and file accordingly,” says Balwant Jain.

Interest income

“Do not forget to mention the interest earned on your saving bank accounts and fixed deposits,”says Balwant Jain, certified financial planner based in Mumbai.  You should be adding this interest income to your gross income and then proceed to compute the income tax. Do check your bank account statements for interest earned by various fixed deposits and bonds you hold. If you have invested in a bank fixed deposits

Income of minors

“If you have a minor son and daughter then the interest income earned in their name must be added to your income and then offered to tax,” says Balwant Jain. The income earned in the name of kids must be added to the income of that parent whose income is higher among two.

Provide correct bank details

Last but the most important, mention your correct bank account details while filing income tax returns. This is essential to process your tax refund, if any.

Filling Income Tax return? Don't miss these 9 tax breaks

Income tax return filing is a process that is often completed mechanically.

However, investing a little time and thought into it can allow you to claim deductions you might have failed to while submitting your investment declarations. Read on to see how you can maximise your tax breaks.

1. Savings account interest
The balance in your savings account earns interest every quarter, which is considered part of your total income. However, the income tax (I-T) department, under Section 80TTA, allows exemption of up to Rs 10,000 on this interest. Interest earned on post office savings will also fetch a similar benefit.

2. Rent exemption without HRA
Many taxpayers shell out house rent but can’t claim deductions due to the absence of the house rent allowance (HRA) component in their salary. Under Section 80GG, you can avail of the benefit for the rent even if your salary package does not include HRA, provided you are not eligible for any housing benefit. You will not qualify for this break if you, your spouse or child owns the house you live in. The exemption is limited to the least of: rent paid less 10% of total income; or Rs 5,000 a month; or 25% of total income.

3. Breaks for specified illnesses
Keeping in mind the fact that treatment of ailments like cancer, kidney failure or AIDS entails huge expenses, the income tax rules allow relief under Section 80DDB to tax-payers suffering from such diseases.

Specified diseases under Sec 80DDB
Taxpayers can claim up to Rs 40,000 in deductions if he suffers from any of the following ailments
Ataxia, Full-blown AIDS, Malignant cancers, Dementia Cholera, Hemiballismus, Thalassaemia, Chronic kidney, failure Parkinson’s disease, Haemophilia, Motor neuron disease, Dystonia, Aphasia

They can claim a tax deduction of up to Rs 40,000. “If the person is a senior citizen, then the deduction can go up to Rs 60,000,” says Chetan Chandak, Head, Tax research, H&R Block. If the afflicted taxpayer happens to be a super senior citizen, the relief is enhanced to Rs 80,000. However, if the expenses incurred have been reimbursed by employers or through insurance policies, the taxpayers will not qualify for the deduction. If the reimbursement is partial, they will be eligible for the tax break on the balance amount.

4. Ancillary home loan charges
Home loan borrowers know that one of the chief benefits of this loan is the tax benefits it offers on the principal repayment (Section 80C) and interest paid (Section 24). However, few know that even the processing fee paid can be claimed as deduction under Section 24. The processing fees and other ancillary charges are considered as interest and qualify as exemptions.

5. Loans for down payments
Home loan-seekers often borrow from friends and relatives to arrange for the downpayment. They either do not pay any interest on such loans or if they do, fail to claim deductions under Section 24, despite being eligible. Section 24 also covers interest paid on any loan taken for the purchase, renovation or reconstruction of a house. However, you should draw up a loan agreement with the lender. The interest earned by the lender will be taxed as his income.

6. Deduction for disabilities
If a taxpayer suffers from 40% disability (as certified by a medical authority), he/she can claim a deduction of up to Rs 75,000 under Section 80U. Expenses incurred in respect of a disabled dependent will fetch a deduction of Rs 75,000 under Section 80DD. In both cases, if the disability is severe (more than 80%), the deduction is Rs 1.25 lakh. This is a flat deduction. The disabled should dependent on the taxpayer for maintenance.

7. Income of disabled child
If you have made investments in the name of your spouse or minor child, the income earned will be clubbed with your income under Section 64 and taxed as per the slab applicable to you. However, in case the child is disabled, income from investments made in his/her name will not be clubbed with the income of parents. The latter can use this provision to invest in taxable instruments like FDs and debt funds.

8. Setting off losses
If you lost money in investments during the previous financial year, you can adjust some losses against capital gains from the sale of stocks, property, gold or debt funds. Short-term capital losses can be set off against both short-term capital gains as well as taxable long-term capital gains. Long term capital losses can only be set off against taxable long-term capital gains.

9. Benefits for donations made
Typically, deductions under Section 80G on donations made do not reflect in Form 16. So, this exemption can be claimed while filing returns. Depending on where you have contributed, you can claim a deduction of 50-100% of the donation made. However, it cannot exceed 10% of your total income. “If the donation was made in cash, no deduction is allowable if the amount exceeds Rs 2,000,” says Dhamodharan, Tax Savings and Investment counselor.