Going by the Budget 2019 proposals, a salaried individual with gross total income up to Rs 7.75 lakh can invest in various tax saving avenues and avail of different deductions to reduce taxable income to Rs 5 lakh and consequently pay no tax for FY2019-20. Such a person would be saving tax of Rs 15080 compared to tax payable in current FY 2018-19, according to EY analysis.
Here’s how. Say your gross total income for FY 2019-20 is Rs 7.75 lakh.
First you can claim standard deduction of Rs 50,000 for FY 2019-20 as against Rs 40,000 available for current financial year as Budget 2019 proposes to hike this standard deduction by Rs 10,000.
You can invest Rs 1.5 lakh under section 80C in any of the eligible tax saving avenues of PPF, EPF etc or use tuition fees paid for children to claim a deduction of the same amount from the gross total income. This can be claimed as a deduction from your gross income of Rs 7.75 lakh reducing it to Rs 6.25 lakh.
Next, invest Rs 50,000 under section 80CCD (1B) in the National Pension Scheme.
Next, pay Rs 25,000 premium for medical insurance policy(ies) for yourself and family and claim a deduction of the same amount from gross total income under section 80D. This deduction can be higher if you also pay medical insurance premium for your senior citizen parents.
|Tax Calculation – Resident||All figures in Rs per annum|
|Less: Standard deduction||(40,000)||(50,000)|
|Income from other sources||10,000||10,000|
|Gross Taxable Income||7,45,000||7,35,000|
|Deduction under Section 80C||(1,50,000)||(1,50,000)|
|Deduction under Section 80CCD(1B)||(50,000)||(50,000)|
|Deduction under Section 80D||(25,000)||(25,000)|
|Deduction under Section 80TTA||(10,000)||(10,000)|
|Less: Rebate under section 87A||–||(12,500)|
|Total tax payable after Rebate||14,500||–|
|Surcharge @10% / 15%||–||–|
|Total tax payable after surcharge||14,500||–|
|Education Cess @ 4%||580||–|
|Total tax, surcharge and education cess||15,080||–|
|Difference – extra tax payable||(15,080)|
|EY Analysis: Salaried tax payer claiming full benefit of Section 80C, 80D for self and family and 80CCD(1B) with gross salary of INR 7.75 lacs will not be required to pay any tax and will save INR 15,080|
Assuming you have other interest income upto Rs 10,000. This too can be nullified by claiming a deduction of maximum Rs 10,000 under section 80TTA.
After claiming all the above your gross total income can be reduced to a taxable income of Rs 5 lakh which is effectively tax exempt.