Income Tax Standard Deduction , Rebate under Section 87A (Applicability : F.Y. 2019-20 onwards)

Income Tax Standard Deduction and 

Rebate under Section 87A

Union Budget 2018 

The Finance Minister of India introduced Standard Deduction of Rs.40,000 in Budget 2018 for salaried employees. However, the deduction of Transport allowance of Rs. 19,200 per annum and medical reimbursement of Rs. 15,000 per annum will no longer be available to salaried employees.

Interim Budget 2019

The Interim Budget presented on 1 February provides an additional Rs.10,000 to the Standard Deduction introduced in 2018 i.e. Now Salaried employees can claim standard deductions of up to Rs.50,000.

Further, The Income* limit to avail Tax Rebate under section 87A raised to Rs.5 Lakh from existing limit of  Rs.3.5 Lakh. In other words, persons with Total Income up to Rs. 5 lakh can claim Tax rebate of Rs.12,500. Previously Tax rebate was limited to Rs.2,500.

Income Tax Deduction and Tax Rebate

Please Note : There is no change is Income Tax Slab Rate for F.Y 2019-20.

* Income here means Total Income ( i.e. Sum Total of All incomes whether Salary, House Property, Business Income, Capital Gain and Other sources income Less deductions available under section 80C to 80U).

Condition for Claiming Rebate under Section 87A

Total Income must be equal to or less than Rs.5 Lakh

Individual must be Resident in India

87A will only be available to Individual and not to HUF, Partnership Firm, Company etc.

Super Senior Citizens (80 years or above) are not allowed to claim Rebate under this section as their Total income is already exempt up to Rs.5 lakh

Total Tax Rebate allowed would be Rs.12,500 or tax payable whichever is lower

Tax Rebate will be allowed before the levy of Health and Education cess of 4%

 Let us understand the above deductions in Tabular form along with an example ;

Particulars	F.Y. 2018-19	F.Y. 2019-20
Transport Allowance (Allowed till F.Y.2017-18)	Not Available	Not Available
Medical Reimbursement (Allowed till F.Y.2017-18)	Not Available	Not Available
Standard deduction	40,000 /-	50,000 /-
Total Income Eligible for 87A Rebate	3,50,000	5,00,000
Limit of Tax Rebate	2,500	12,500

Illustration

Case 1: Where Total Income after all deductions is up to Rs.5 Lakh

Particulars  Salary (say)	FY. 2018-19  7,40,000	FY. 2019-20 7,50,000
Less: Standard Deduction  House Property Income	-40,000	-50,000
	-	-
Business Income	-	-
Capital Gains	-	-
Other Sources	-	-
Gross Total Income	7,00,000	7,00,000
Less Deductions (say)	-200,000	-200,000
80 C to 80U
Total Income	5,00,000**	5,00,000
Calculation of Tax Liability
Up to 2,50,000 (A)	-	-
2,50,001-5,00,000 @ 5% (B)	12,500	12,500
Tax (A+B)	12,500	12,500
Less: Rebate u/s 87A	-	12,500
Net Tax	12,500	-
Add: E. Cess @ 4%	500	-
Total Tax Payable	13,000	-

** As Total Income is more than Rs.3,50,000, Rebate u/s 87A will not be available in F.Y. 2018-19.

Case 2: Where Total Income after all deductions exceeds Rs.5 Lakh

Particulars  Salary (say)	FY. 2018-19  7,90,000	FY. 2019-20 800,000
Less: Standard Deduction  House Property Income	-40,000	-50,000
	-	-
Business Income	-	-
Capital Gains	-	-
Other Sources	-	-
Gross Total Income	7,50,000	7,50,000
Less Deductions (say)	-200,000	-200,000
80 C to 80U
Total Income	5,50,000	5,50,000
Calculation of Tax Liability
Up to 2,50,000 (A)	-	-
2,50,001-5,00,000 @ 5% (B)	12,500	12,500
5,00,001 - 10,00,000 @ 20% ©	10000	10000
Tax (A+B+C)	22,500	22,500
Less: Rebate u/s 87A	-	-
Net Tax	22,500	22,500
Add: E. Cess @ 4%	900	900
Total Tax Payable	23,400	23,400

 Here, Rebate under section 87A will not be available in both financial year as total Income exceed the limit prescribed.

 Thank you !

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