Budget 2019: No Tax Rebate if You Earn More Than Rs 6.50 Lakh!

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One of the biggest takeaways from the interim budget presented by Finance Minister Piyush Goyal on Friday, 1 February, was the announcement of a full tax rebate for annual incomes up to Rs 5 lakhs.(Photo courtesy: The Quint/Arnica Kala)
Budget 2019: No Tax Rebate if You Earn More Than Rs 6.50 Lakh!

Vakasha SachdevUpdated: 14H 59M AGO

One of the biggest takeaways from the interim budget presented by Finance Minister Piyush Goyal on Friday, 1 February, was the announcement of a full tax rebate for annual incomes up to Rs 5 lakhs.
In his speech, Goyal described the measure as follows:
“Individual taxpayers having taxable annual income up to 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 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 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 18,500 crore to an estimated 3 crore middle class taxpayers comprising self employed, small business, small traders, salary earners,pensioners and senior citizens.”
Budget Speech, available at https://www.indiabudget.gov.in/bspeecha.asp
But what exactly does this mean? Has the tax slab been changed? Is income upto Rs 5 lakhs exempted from income tax? Will this affect anyone earning more than Rs 5 lakhs?
Here are the answers to these questions.
Does this proposal in the interim budget make any changes to the tax slab?
No, the rebate does not affect the tax slabs. The exemption limit is therefore still Rs 2.50 lakhs, ie, you are exempted from paying tax on taxable income (income minus relevant deductions) of upto Rs 2.50 lakhs per year.
If your income is above Rs 2.50 lakhs, you are liable to tax, depending on how much your income is. The amount of tax you pay can, however, be reduced if you are eligible for any tax rebates.
A rebate is therefore a reduction in the amount of tax you are required to pay. It is different from a refund, which you get after first paying the tax. It is also different from an exemption, which reduces your taxable income.
The Existing Position on Rebates
Were tax rebates already available for individuals with low incomes?
The concept of a tax rebate for individuals with low incomes was introduced with effect from 1 April 2014 by the UPA-II government, as Section 87A of the Income Tax Act 1961.
It allowed people with incomes under Rs 5 lakhs to claim a reduction of their income tax by 100 percent, although the maximum reduction that could be claimed was Rs 2,000.

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