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Budget FY 2019-20 – Tax on Salary

The interim Union Budget for FY 2019-20 was tabled in the Parliament by the Finance Minister of India on 01-Feb-2019. Here are the key proposals related to computation of tax on salary which payroll managers need to consider for FY 2019-20, effective 01-Apr-2019.

1. Tax slabs remain the same

The tax rates for salaried employees below 60 years of age for FY 2019-20 shall be the same as those for FY 2018-19.

The tax rates (for FY 2019-20) for salaried employees below 60 years of age are as follows.

Total Income for the Year in Rs Tax Rate in %
Up to 2,50,000 Nil
2,50,001 to 5,00,000 5
5,00,001 to 10,00,000 20
Above 10,00,000 30

The tax rates (for FY 2019-20) for salaried employees aged 60 years and above but below 80 years are as follows.

Total Income for the Year in Rs Tax Rate in %
Up to 3,00,000 Nil
3,00,001 to 5,00,000 5
5,00,001 to 10,00,000 20
Above 10,00,000 30

2. Surcharge remains the same

In case the total taxable income for the year goes beyond Rs 50 lakh (but is less than or equal to Rs 1 crore) in the year, a surcharge of 10% (subject to marginal relief) on the income tax is to be deducted, as it was in FY 2018-19.

In case the total taxable income for the year goes beyond Rs 1 crore in the year, a surcharge of 15% (subject to marginal relief) on the income tax is to be deducted – the surcharge was 15% in FY 2018-19 too.

3. Health and Education Cess stays unchanged

The “Health and Education Cess” stays at 4% on income tax and surcharge, if applicable.

4. Increase in rebate under Section 87A

The maximum tax rebate under Section 87A has been increased to Rs 12,500. The limit was Rs 2,500 for FY 2018-19. An employee’s net taxable income after all deductions (including Standard Deduction and Chapter VIA deductions) should not exceed Rs 5,00,000, for the employee to be able to avail the rebate under Section 87A in 2019-20.

5. Increase in Standard Deduction

In the 2019-20, the Standard Deduction shall be Rs 50,000. In 2018-19, the Standard Deduction was Rs 40,000.

6. No notional income on the second self-occupied house property

In 2018-19, an employee could specify only one house property as “self-occupied”. In case the employee owned 2 properties which were not let-out – in other words, the employee occupied one property and kept the other locked, the employee could declare only one property as self-occupied for which the annual value is zero. With regard to the second property (which was kept locked), the employee had to present a notional rental value and consider it as an income from house property.

In 2019-20, an employee can declare up to 2 properties as self-occupied for which the income (from house property) shall be zero.

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