Budget 2019: Income Tax Exemption Limit and Rates – Complete Detailed Guide
Table of Contents
Overview of Budget 2019 Income Tax Changes
The Union Budget 2019, presented by Finance Minister Nirmala Sitharaman, focused strongly on providing relief to the middle class, salaried employees, pensioners and small taxpayers.
While the income tax slab rates remained unchanged, a major relief came through an enhanced rebate under Section 87A. This effectively made taxable income up to ₹5 lakh tax-free for eligible individuals.
Combined with the increased standard deduction of ₹50,000 and higher TDS thresholds, Budget 2019 significantly improved the net savings and take-home income of taxpayers.
What Exactly Changed After Budget 2019?
| Announcement | Impact |
|---|---|
| Rebate under Section 87A increased | Taxable income up to ₹5,00,000 becomes effectively tax-free for eligible resident individuals. |
| Standard deduction for salaried/pensioners | Increased from ₹40,000 to ₹50,000, reducing taxable salary income. |
| TDS threshold on bank/post office interest | Raised from ₹10,000 to ₹40,000. |
| TDS threshold on rental income | Increased from ₹1,80,000 to ₹2,40,000 per year. |
| Capital gains exemption on residential house | Option to claim exemption for two houses (up to ₹2 crore), once in a lifetime. |
| Notional rent on second self-occupied house | Notional income on second self-occupied house made non-taxable. |
Income Tax Slab Rates – FY 2019–20 (AY 2020–21)
1. Individuals Below 60 Years & HUF
| Taxable Income | Tax Rate |
|---|---|
| Up to ₹2,50,000 | 0% |
| ₹2,50,001 – ₹5,00,000 | 5% |
| ₹5,00,001 – ₹10,00,000 | 20% |
| Above ₹10,00,000 | 30% |
Note: Rebate under Section 87A can reduce tax liability to zero if taxable income does not exceed ₹5 lakh.
2. Senior Citizens (60–80 years)
| Taxable Income | Tax Rate |
|---|---|
| Up to ₹3,00,000 | 0% |
| ₹3,00,001 – ₹5,00,000 | 5% |
| ₹5,00,001 – ₹10,00,000 | 20% |
| Above ₹10,00,000 | 30% |
3. Super Senior Citizens (Above 80 years)
| Taxable Income | Tax Rate |
|---|---|
| Up to ₹5,00,000 | 0% |
| ₹5,00,001 – ₹10,00,000 | 20% |
| Above ₹10,00,000 | 30% |
Surcharge and Cess
- Health & Education Cess: 4% on income tax (plus surcharge, if any).
- Surcharge: 10% if total income is between ₹50 lakh and ₹1 crore.
- Surcharge: 15% if total income exceeds ₹1 crore.
Rebate Under Section 87A – Zero Tax up to ₹5 Lakh
The biggest relief in Budget 2019 came through an enhanced rebate under Section 87A.
| Maximum rebate amount | ₹12,500 |
|---|---|
| Eligible category | Resident individuals (including senior citizens) |
| Condition | Taxable income (after deductions) ≤ ₹5,00,000 |
| Effect | Income tax payable becomes zero (excluding cess), as rebate cancels tax liability up to ₹12,500. |
Other Key Tax Reliefs Announced in Budget 2019
Apart from the Section 87A rebate and standard deduction enhancement, several other proposals helped taxpayers:
- Higher TDS threshold on interest from bank and post office deposits.
- Higher TDS threshold on rental income, reducing TDS compliance for small landlords.
- Option to claim capital gains exemption on two residential houses (once in lifetime) for gains up to ₹2 crore.
- Notional rent on second self-occupied house property removed from the scope of taxation.
- Standard deduction of ₹50,000 for salaried employees and pensioners, simplifying earlier transport and medical allowances.
Practical Tax Calculation Examples
Example 1: Taxable Income ₹4,80,000
- Taxable income = ₹4,80,000
- Tax as per slab: 5% of (₹4,80,000 – ₹2,50,000) = 5% of ₹2,30,000 = ₹11,500
- Rebate under Section 87A = ₹11,500
Final tax payable = ₹0 (plus cess on zero = zero)
Example 2: Gross Income ₹6,00,000, Deductions Bring Taxable to ₹5,00,000
- Gross total income = ₹6,00,000
- Deductions (e.g., Section 80C, 80D etc.) = ₹1,00,000
- Taxable income = ₹5,00,000
- Tax as per slab = 5% of (₹5,00,000 – ₹2,50,000) = ₹12,500
- Rebate under Section 87A = ₹12,500
Final tax payable = ₹0
Example 3: Taxable Income ₹5,50,000 (No Extra Deductions)
- Taxable income = ₹5,50,000
- Tax:
- 0% on ₹2,50,000 = ₹0
- 5% on next ₹2,50,000 = ₹12,500
- 20% on remaining ₹50,000 = ₹10,000
- Total tax before cess = ₹22,500
- Health & Education Cess @ 4% = ₹900
Total tax payable ≈ ₹23,400 and no Section 87A rebate, as taxable income exceeds ₹5 lakh.
Frequently Asked Questions – Budget 2019 Income Tax
- Resident individuals (including senior citizens)
- Whose taxable income does not exceed ₹5,00,000
- Your income before deductions is above the basic exemption limit, or
- TDS has been deducted and you want a refund, or
- You meet other specified conditions under the Income Tax Act.
Conclusion – How Budget 2019 Helped Individual Taxpayers
Budget 2019 brought meaningful relief to individual taxpayers without changing the core tax slabs. By combining a higher Section 87A rebate, a larger standard deduction, higher TDS thresholds and relief for house property income, the budget helped improve cash flow and savings for the middle class.
Taxpayers should carefully use deductions under Sections 80C, 80D, 80CCD(1B) and others to bring their taxable income within ₹5 lakh wherever possible, and thereby enjoy the benefit of zero tax for FY 2019–20.
If you want personalised assistance with tax planning, deductions, or ITR filing, you can reach out to R K Associates for professional support.
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