Income tax for salaried employees

Income tax for salaried employees

All about Individual Income Tax Slab

With the financial year 2019-20 coming to a close, it is time to review your tax liabilities and prepare to file your income taxes for the year. While there is still ample time to file your income tax, it is best to learn about the various income tax slabs and rates applicable for FY 2019-20.

In India, every individual, Hindu Undivided Family, business, corporate and other such establishments are required to pay income tax. The administration, collection and recovery of income tax are set according to the regulations under the Income Tax Act, 1961. Even though your income tax is paid on the basis of your monthly earnings, it is calculated annually. 

Your income tax is calculated on the basis of your earnings from 5 heads of income. Namely:
  1. Salary.
  2. Income from capital gains.
  3. Income from business or profession.
  4. Income from house property.
  5. Income from other sources.
Now, the government puts forth various tax slabs applicable to individuals below 60 years of age, senior citizens and super-senior citizens. Income from all the sources except capital gains is taxed according to these slab rates.

Following is an elaboration on the individual income tax slab for salaried individuals who are below 60 years of age for the financial year 2019-20.

Income Tax Slab for Salaried person (below 60 years of age) and HUF – FY 2019-20

Income Tax Slabs
Rate of Tax
For individuals with income of up to ₹2.5 Lakh
For Individuals with income ranging between ₹2,50,001 and ₹5 Lakh
5% of the total income above ₹2,50,000
For Individuals with income ranging between ₹5,00,001 and ₹10 Lakh
₹12,500+ 20% of the total income above ₹5 Lakh
For Individuals with income above ₹10 Lakh
₹1,12,500+ 30% of their total income above ₹10 Lakh

An additional 4% health and education cess are also applicable on the tax payable calculated according to the above tax slabs for a salaried individual.

Apart from this, an additional surcharge is applicable for individuals with net income above Rs. 50 Lakh. The amount of surcharge applicable can be illustrated as follows:

Income limit
Surcharge rate on Income Tax
When the net income is higher than ₹50 Lakh but less than ₹1 Crore
When net income is higher than ₹1 Crore and less than ₹2 Crore
When net income is higher than ₹2 Crore but less than ₹5 Crore
When net income is higher than ₹5 Crore

Income Tax Rebate for Salaried Person

According to the Union Budget 2019, salaried individuals can avail an income tax rebate under Section 87A of the Income Tax Act, 1961. This rebate allows you to pay a marginally lower tax amount to individuals earning an income below Rs. 5 Lakh. This rebate allows individuals belonging to the lower-income bracket to reduce their tax liabilities.

Eligibility for salaried individuals to claim the rebate under Section 87A for the financial year 2019-20:
  1. One must be an Indian resident.
  2. The total income after all the deductions under Section 80 should not be higher than Rs. 5 Lakh.
This rebate limit is set at Rs. 12,500. This means that if your total tax payable is less than Rs. 12,500, then the total amount will be rebate under Section 87A. 


Income Tax Exemptions for Salaried Employees

Salaried individuals below the age of 60 years are eligible to avail various tax exemptions, as specified under Section 80 of the Income Tax Act. Following is a table illustrating the applicability of these income tax exemptions along with their limits:
Section 80C - On earnings from -
  1. Tax saving fixed deposits
  2. National Savings Certificate
  3. Equity Linked Savings Scheme
  4. National Pension Scheme
  5. Employees Provident fund
  6. Public Provident Fund
  7. Senior Citizens Savings Scheme
  8. Sukanya Samriddhi Yojana etc.
Limit - Maximum exemption limit of up to ₹1.5 Lakh.
Section 80CCC - On the deposited amount in LIC annuity plans.
Limit - Maximum exemption limit of up to ₹1.5 Lakh.
Section 80TTA - On interest earned from the bank savings account
Limit - ₹10,000
Section 80GG - Rent payment when the individual does not earn House Rent Allowance
Limit - The lower amount between –
Rent paid – (10% of total income)
(25% of the total income) ₹5000 per month
Section 80E - Total interest paid on education loan
Limit - No limit
Section 80EE - Home loan interest for first-timers
Limit - ₹50,000
Section 80CCG - Investment in the equity products under the Rajiv Gandhi Equity Scheme
Limit - The lower amount between – a) ₹25,000 b) 50% of the investment amount in equity schemes.
Section 80D - Health insurance policy premium for self and family
Limit –
  1. ₹25,000 for self, spouse and dependent children
  2. ₹25,000 (for self, spouse and dependent children) + ₹25,000 for parents
  3. ₹25,000 (for self, spouse and dependent children) + up to ₹50,000 (for parents above 60 years of age)
  4. Up to ₹50,000 (self, spouse and dependent children with the eldest member above 60 years of age) + up to ₹50,000 (for parents above 60 years of age)
Section 80DDB - Medical treatment of dependent individuals suffering from specified diseases.
Limit -
  1. For individuals below 60 years of age, the deduction is available for up to ₹ 40,000.
  2. For individuals above 60 years of age, the deduction limit is at ₹1,00,000.
Section 80GGC - Contribution to political parties
Limit - No limitations for payment methods apart from cash.
Section 80G - Contributions to charitable institutions and certain relief funds.
Limit - Few charitable donations are eligible for 50% deductions, and few are eligible for 100% deductions.

These are some of the major income tax exemptions for salaried employees in India.
We have further listed some of the income tax benefits in the form of allowances and deductions that can help reduce the tax liability for salaried individuals.

These are:
  1. A standard deduction of up to ₹50,000 in place of the previously available medical reimbursement and transport allowance.
  2. Leave travel allowance, which can be claimed twice in a block of four years
  3. Reimbursement for expenses on telephone and mobile used at residence.
  4. Expenses incurred on food coupons.
  5. Exemptions on relocation allowance for shifting from one city to another for business purposes.
  6. Benefits on various facilities provided by the employer like health club facilities, cab facilities, gifts or vouchers
With such allowances and exemptions from income tax for salaried person, you can reduce your tax liabilities to quite an extent. So, before you start filing your income tax returns for the financial year 2019-20, make sure you have a comprehensive idea about all the applicable slabs, exemptions and benefits that you can avail on your tax payments.

For more info visit TAXAJ
Posted by Ramesh Kumar Gupta

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