Reality of No Tax on Rs. 5 Lakhs Income Rule!!

Were you as excited as me when the 100% Tax Rebate for Rs. 5 Lakhs Taxable Income Earners was
brought in Budget 2019?? Well, there’s quite a lot to understand in that. It is a strong and beneficial
proposal, but comes with a condition.

A normal interpretation was that up to Rs. 5 lakhs, no income tax will be applicable which obviously
would call for a new tax slab. But what it really meant was,

 Rebate under Section 87A increased to Rs. 12500.

 No tax charged till annual income of Rs. 2,50,000.
 For the slab of Rs. 2.5 Lakhs to Rs. 5 Lakhs, tax is applied at 5%, which is Rs. 12,500.
 Thus, if taxable income is up to Rs. 5 lakhs, individual earns a full rebate of Rs. 12,500 and no
income tax is charged.
 If taxable income goes beyond Rs. 5 lakhs, no such rebate is offered and tax will be
applicable as per the slab.

Sounds different than you thought? You can still save tax to a great extent by investing in following
well-known avenues.

Maximum Limit
Section of IT Act Tax Saving Options
(Rs.)

ELSS, Life
80C 1,50,000
Insurance, PPF, etc.

80CCD(1B) NPS 50,000

Medical Insurance
80D 25,000*
for Family
 Medical Insurance
80D 25,000*
for Parents

Interest on Savings
80TTA 10,000
Bank A/c

Interest on Home
24(b) 2,00,000
Loan

Standard
16(ia) 50,000
Deduction

Total 5,10,000

*: Maximum Limit for 80D components is Rs. 50,000 in case of Senior Citizens.

If you invest as per the above table, you get to reduce your taxable income by Rs. 5.10 lakhs which
means that if your income is Rs. 10.10 lakhs, with this plan of investment, you can reduce your
taxable income up to Rs. 5 lakhs and enjoy the advantage of rebate provision.

There are other tax saving options available as well which are less known but can be utilised if
needed.

Section of IT Act Tax Saving Options Maximum Limit (Rs.)

Donations to
80G No limit
Approved Institutions

Donations to Political
80GGC No limit
Parties

Medical Expenditure
75,000 [1.25 Lakhs for
80DD for Disabled
Severe disability]
Dependents

Medical Expenditure 40,000 [1 Lakh for

80DDB
on Specific Diseases Senior Citizen]

Interest on Education
80E No limit
Loan

Interest on Senior
80TTB 50,000
Citizen’s Deposits

10(13A) House rent Allowance As per criteria

Leave-travel
10(5) As per employer
Allowance
These benefits can be used to bring your taxable income up to Rs. 5 lakhs to avoid income tax. The
list is too long to present fully, hence, keep a check before taking the final call of declaring the
taxable income and letting a big tax charged on it.