I would like to know about the new rule of income tax. They say that there is no change in the tax slab but someone with the income of up to Rs 6.5 lakh will not have to pay any tax? Can you please help me understand.
If your income is Rs 6.5 lakh, and if you invest Rs 1.5 lakh under Section 80C then you will not have to pay any tax. The provision has been made on the taxable income. No matter how much is your actual income, if your taxable income does not exceed Rs 5 lakh, then you will not have to pay any taxes.
Yes, there is no change in the tax-slab. But a rebate of Rs 12,500 has been given. As of now, income of upto Rs 2.5 lakh is exempt. And the tax liability on the income of Rs 2.5 lakh to Rs 5 lakh comes at Rs 12,500. This tax liability has been completely waived off by providing a rebate by the government to people whose taxable income does not exceed Rs 5 lakh.
And it is not just for anyone with an income of Rs 6.5 lakh. Your taxable income after all the deductions should not exceed Rs 5 lakh. That's it. So, after investing Rs 1.5 lakh under Section 80C, if you invest Rs 50,000 under NPS, the tax liability for someone with an annual income of Rs 7 lakh would also be zero. Similarly, it can be zero even for someone with an annual income of Rs 9 lakh if he takes a deduction of Rs 2 lakh for paying home loan interest in addition to the above mentioned deductions.