Economics 2020-03-05

Seeking the Zero Tax Income Slab of INR 5 Lakh with Exemptions and Deductions How Feasible Is It

With the announcement of ‘zero tax’ for income up to INR 5 lakh, the middle-class taxpayers are an upbeat lot! They are happy for their tax savings for the financial year 2019-20 as this year’s interim budget promises them full rebate under section 87A. While government has cleverly kept the taxation slabs completely unchanged, the advantages could be ensured only through careful judgment and knowledge regarding your finances and investment portfolios. One needs to balance the deductions and exemptions to his favor so as to actually qualify for the much talked ‘INR 5 lakh’ zero tax slab. Let’s have a generic assessment on the same through some useful points that need to be kept in mind.

Making a rational investigation – for deeper insights !

First of all, be assured that government and its taxmen are in no dilemma regarding this 100% rebate that they are offering this financial year under 87A! On the other hand, it is just a matter of making calculated adjustments in one’s fiscal spectrum so that this taxation slab is not crossed. Those offering payroll outsourcing services have been assisting the employees through objective advice in a customized manner.

The experts counting pros of this offer are counting its benefits even for those who are earning up to INR 9 Lakh per annum. This may sound too mouth watering for a larger chunk of society but may not be truly feasible. They opine that such benefits could materialize to the favor of the seeker only in case of drastic deductions and extended investments; which also means that the earner may not be even left with ample income to spend as per his living standard!

This justifies the assumption that this rebate for taxable income up to INR 5 lakh is a blur for them but also equally good for the middle-class taxpayer’s community that is a supra array here in our country. The latter should therefore be thankful to the taxmen for this initiative and may choose to vote for the incumbent executive! While deviating ourselves from the politics of the day, let us see how the 87A clause could be substantiated for the middle classes. Here are some clues and counsels in this regard from the desk of experts providing outsourced payroll solutions.

  • The Standard Deduction – a good ally! With this deduction being pegged at INR 50000 (this financial year forth), it strikingly reduces your taxable income in one blow.
  • Exemptions under Section 80C – your investments & savings spectrum is hugely determined by it! Leverage this matrix through careful selection of instruments.
  • Section 80D – medical insurance policies – balance your potential medical bills & liabilities with the ability to bring down taxable income (to INR 5 lakh).
  • Section 80 CCD – your contribution to pension scheme like NPS & Atal Pension Scheme is also considered for deductions and it brings down the taxable income. To qualify for the NPS, an employee must contribute atleast INR 500 per month (tier 1 account) and INR 250 per month (tier 2 account).
  • Section 80 CCC – insurance policies – the need of every household and hence must be gainfully utilized to claim deductions for lowering one’s taxable income.

These five dimensions are much resonant to the common seekers who wish to take advantage of 87A; while there are many finer parameters too, that could be manipulated as per one’s demand.

Deriving insights from this above discussion, it could be said that the full IT rebate is a reasoned deal and warrants judgment from the taxpayer; and of course, it is not a void! You can also gain through this offer by making an informed decision in advance. Payroll outsourcing services providers have already derived objective insights out of this offer and are actively assisting the employees of the firms.

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