If your taxable income is over Rs 5 lakh, the rebate will not apply.
An expansion in the income tax slab rates was one of the big expectations of the interim budget. Towards the conclusion of his speech, acting finance minister Piyush Goyal preferably announced a rebate for people with taxable income below Rs 5 lakh.
In other terms, if your taxable income is over Rs 5 lakh, the deduction will not apply.
The rebate, in a review, shall be restricted to Rs 12,500 per year (previously Rs 2,500), adding roughly Rs 1,000 a month as more disposable income.
To illuminate, the impact of this is reflected on the net total income after claiming the deductions under Chapter VI-A, which governs tax savings scheme investment and housing loan deduction up to Rs 1.5 lakh per year.
On a macro level, even if this is a populist step eyeing the upcoming Lok Sabha elections, it’s a clever move as the government’s treasury wouldn’t be drastically moved.
Acting finance minister Piyush Goyal declared that the government will forego Rs 18,500 crore by awarding such rebate. When confronted with the overall individual tax collection target of Rs 6.2 lakh crore and incremental tax collection of Rs 91,000 crore, the discount will not create a big hole in the exchequer’s pocket. It will, nonetheless, have a material impact on the psyche of marginal taxpayers. In other words, the step will not go down well with taxpayers in the intermediate-income bracket who already feel depressed by the large tax slabs.
The government’s underlying philosophy, it seems, is to grasp the group that has a taxable income between Rs 2.5 lakh and Rs 5 lakh per year.