All You Need to Know About Current Income Tax Exemption Limit

The income tax exemption limit in India is currently fixed at Rs 2.5 lakh. However, income up to Rs 5 lakh is practically tax-free because of the rebate option available under section 87A. But the tax liability of the individual taxpayer Who makes up to Rs 5 lakh increases. Hence, there’s been a long-standing demand to raise the income tax exemption limit from Rs 2.5 lakh to Rs 5 lakh.

The Associated Chambers of Commerce and Industry of India (ASSOCHAM) has proposed to the finance ministry to increase the income tax exemption limit to Rs 5 lakh in the union budget 2023. This will ensure more disposable income in the hands of people, thereby also giving the economy a leg-up in the recovery.

The Finance Act of 2003 introduced and periodically amended Section 87A. If your income does not exceed Rs. 5 lakh, an individual taxpayer, who is a resident of India, is eligible to receive a tax rebate of up to Rs. 12,500. Once the income reaches this threshold, however, you can no longer claim the refund under Section 87A.

This exemption is not available to everyone. Although all individuals and HUFs, whether residents or non-residents are subject to the basic exemption limit of Rs. 2.50 lakh, the rebate under Section 87A is only available to an individual, and even then, only if he is a resident for income tax purposes. Therefore, none of the HUFs or non-residents is eligible for this reimbursement.

The question of which income should be taken into account to qualify for this rebate has always been unclear in the minds of taxpayers. Your final tax obligation is calculated based on your income. The income that should be taken into account, for this reason, is the income that is obtained after offsetting all of the brought forward past losses against the income of the current year.

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