Budget 2019: Income up to Rs 5 lakh can pay zero tax but still need

to file ITR
PREETI MOTIANI

ET Online | Updated: Jul 6, 2019, 08.45 AM IST

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As per the Budget 2019 proposals, it has been proposed to hike the rebate under Section 87A to
Rs 12,500.
Budget 2019 presented by Nirmala Sitharaman in the Parliament, kept the personal income
tax rates and slabs changes as announced in the Interim Budget 2019 unchanged. This meant
that those having taxable income of up to Rs 5 lakh will not have to pay tax for FY 2019-20.

However, if you thought that having a taxable income of up to Rs 5 lakh meant bye-bye to the
tax department think again. You can avail of the zero tax benefit announced in Budget 2019 but
you still need to file your income tax return (ITR). The income tax exemption limit for all
citizens below 60 years still remains at Rs 2.5 lakh and for senior citizens Rs 3 lakh.

Therefore, if you are earning anything above these exemption limits annually then you are
mandatorily required to file your ITR. You can claim the rebate of all tax payable if your taxable
income is up to Rs 5 lakh under section 87A in your ITR when you file it. If you have income up
to Rs 5 lakh but don't file your ITR assuming that your tax payable is zero you are liable to get a
notice from the income tax department.

As per the Interim Finance Minister Piyush Goyal's budget speech in February 2019, "Individual
taxpayers having taxable annual income Rs 5 lakh will get full tax rebate and therefore will not
be required to pay any income tax."

Abhishek Soni, CEO, tax2win.in, a tax-filing firm says, "As per the proposals of Budget 2019,
there will be no tax liability if your taxable income is Rs. 5 lakh or less. However, ITR filing is still
mandatory if your income exceeds the basic exemption limit of Rs. 2.5 Lakh (if age is below 60)."

This would mean that in order to pay zero tax on the income earned by you during the financial
year 2019-20, you will be first required to declare your gross total income by filing ITR. Your
gross total income would include income from various sources such as salary, interest income
from savings account, fixed deposits and so on. Then you will be required to claim all the
deductions and tax breaks such as house rent allowance (HRA), standard deduction,
deductions under section 80C, 80D, interest paid on housing loan etc. which you are eligible for.

After claiming all the deductions as per the current income tax laws from your gross total
income, if your net taxable income does not exceed Rs 5 lakh, then only you will be eligible for
rebate under Section 87A.

The rebate under Section 87A has been hiked to Rs 12,500. This would effectively make tax
liability zero for taxpayers having net taxable income not exceeding Rs 5 lakh.

Naveen Wadhwa, DGM, taxmann.com says, "The key announcement of Interim Budget, that no
tax to be levied if income is up to Rs 5 lakh, has a rider. The tax slabs has not been tinkered with
and this benefit is passed on by extending the scope of relief under Section 87A. Though a
taxpayer, whose income is up to Rs 5 lakh, is not required to pay any tax, yet he is required to
file ITR if his income exceeds the maximum exemption limit. Any late filing of return would invite
the late filing fees of Rs 1,000 under section 234F."