Income Tax Planning: How should the salaried plan their taxes now

Income Tax Planning, income tax, How should salaried plan their taxes, Budget 2019, union budget 2019, budget 2019 tax proposals, tax saving

One of the major highlights of the Budget 2019 was increase in tax rebate under Section 87A from the existing Rs 2500 for income up to Rs 3.5 lakh to Rs 12500 for income up to Rs 5 lakh.

The Union Interim Budget 2019 saw tax proposals that would touch the lives of about three crore salary earners and pensioners. Although there are no changes in the tax slabs, this budget will allow a complete tax rebate for those earning an annual salary within Rs 5 lakh. For the ones earning above Rs 5 lakh, there are other amendments to lower your tax burden.

How to make the best use of the new provisions

While the basic exemption limit, income tax slab rate and deductions under Section 80C of the Income Tax Act remain unchanged, new tax benefits have been introduced such as tax relief through an increase in the ceiling of standard deduction from Rs 40,000 to Rs 50,000.

Salaried individuals who are retiring / taking voluntary retirement in the Financial year 2019-20 would get an exemption on gratuity of Rs 20 lakh. The exemption limit was earlier Rs 10 lakh.

Let’s look at how one can benefit from this with an example.

Mr. Prateek is retiring after 28 years of employment and his last drawn salary is Rs 20,000 per month. He would earn a gratuity of Rs 18 lakh. What would be the tax implication if Mr. Prateek retires in FY 2019-20?

Scenario I: Before Budget 2019

Scenario II: After Budget 2019

Until now, property owners who owned more than one house were taxed on all other properties except for one, which was considered self-occupied. Even if the other properties were not let out, the owner was taxed on a notional rent. The interim budget proposals came with tax relief for these owners, as the second self-occupied house would not be taxed on the basis of notional rent any more.

Planning the taxes

One of the major highlights of the Budget 2019 was increase in tax rebate under Section 87A from the existing Rs 2500 for income up to Rs 3.5 lakh to Rs 12500 for income up to Rs 5 lakh. You can further claim tax deduction up to Rs 25000 under Section 80 (D) through premium payment for health insurance for self and family. Through investment in NPS, you can claim tax exemption up to Rs 50000 under Section 80 (CCD). Under Section 80 (TTA), you can get tax benefits worth Rs 10000 against interest income. So, you can avail a total deduction of up to Rs 2.35 lakh through these options apart from a standard deduction of Rs 50000.

 

[“source=financialexpress”]

 

Author: Loki