Budget 2019: Here's what the tax rebate announcement by FM means for an individual

Interim finance minister Piyush Goyal on Friday announced full tax rebate to individuals having annual income of Rs 5 lakh. This translates to a benefit of Rs 18,500 crore to more than 3 crore taxpayers.

Those in the higher tax brackets will not get any relief as rebate has gone up, not the tax slab itself, said Goyal.

Additionally, the standard deduction has been increased to 50,000 from 40,000 currently. Also, TDS threshold on interest earned on bank/post office deposits is being raised from 10,000 to 40,000.

All the direct tax relief measures will be applicable from April 1 of the current fiscal year.

If you are earning gross income of Rs 6.5 lakh per year and you have made investments of Rs 1.5 lakh allowed under 80C, your taxable income will be Rs 5 lakh. Up to Rs 2.5 lakh, you need not pay the tax. For the next Rs 2.5 lakh, you pay 5 percent income tax of Rs 12,500. With the new tax rebate scheme, you will get Rs 12,500 back as a rebate and your net tax payable is nil.

In case your taxable income is Rs 10 lakh, your total tax would rise to Rs 1,17,000 i.e. nil for the first Rs 2.5 lakh, Rs 12,500 for the next Rs 2.5 lakh at a 5 percent rate, Rs 1,00,000 for the rest Rs 5 lakh at a rate of 20 percent, and lastly Rs 4,500 as cess at the rate of 0.4 percent on the last Rs 5 lakh.