President Donald Trump has proposed a major tax reform that would eliminate federal income tax for individuals earning less than $150,000 annually (approximately 21.3 crore). The plan, which aligns with Trump’s longstanding push for tax cuts, was confirmed by Commerce Secretary Howard Latnik in a recent interview.
“I know what his goal is – no tax for anybody who makes less than $150,000 a year. That’s his goal, and that’s what I’m working for,” Latnik stated, emphasizing the administration’s commitment to tax relief for middle-class Americans.
Trump’s Tax Cut Plan
No federal income tax for individuals earning below $150,000 annually
Abolition of tip taxes, easing tax burdens on service workers
$4.5 trillion in proposed tax cuts, aimed at businesses and individuals alike
Introduction of a $5 million “Golden Visa” program, expected to bring in additional revenue
Targeting offshore tax frauds, to offset potential losses from tax reductions
Concerns Over US Debt & Funding
Trump’s tax cut agenda is expected to provide financial relief to millions of Americans, but critics have raised concerns over the surging national debt and the economic impact of such large-scale cuts. Some experts fear that eliminating income tax for a large portion of the population could widen the country’s fiscal deficit.
However, Commerce Secretary Latnik dismissed these concerns, asserting that the revenue gap would be filled by other sources. “Other people, not Americans, will foot the bill,” he claimed, suggesting that cracking down on offshore tax frauds could provide the government with the funds needed to sustain public programs.
Golden Visa Program & Senate Vote
To supplement the tax cuts, Trump’s team is also pushing for a $5 million Golden Visa program, which would grant residency to foreign investors contributing to the U.S. economy. The next step for this plan is a vote in the Senate. Lawmakers will decide whether to approve or reject Trump’s tax proposal. While some politicians support tax cuts, others are worried about how they will impact the economy and whether they could increase the national debt.
Income Tax Rebate Under Section 87A. Tax Rebate Under Section 87A: Find out Who can claim Income Tax Rebate u/s 87A for FY 2023-24 (AY 2024-25) and FY 2022-23 (AY 2023-24).
A tax rebate on an income of Rs 7 lakh has been introduced in the new tax regime (applicable for FY 2023-24).
Rebate under Section 87A helps taxpayers to reduce their income tax liability. You can claim the said rebate if your total income, i.e. after Chapter VIA deductions, does not exceed Rs 5 lakh (under the old regime) in FY 2023-24. Your income tax liability becomes nil after claiming the rebate under Section 87A.
Rebate u/s 87A for FY 2023-24 (AY 2024-25)
Under both the old and new income tax regimes, the amount of the rebate under Section 87A for FY 2023-24 & FY 2022-23 [(AY (2022-23) & AY (2023-24)] has remained unchanged. However, from FY 2023-24 due to a change in the slab rates under the new tax regime, the rebate threshold is changed. Under the old tax regime, a resident individual with taxable income up to Rs 5,00,000 will be eligible for a tax rebate and under the new income tax regime, a resident individual with taxable income up to Rs 7,00,000 will be eligible for a tax rebate.
How much is the Rebate Allowed u/s 87A?
If an individual’s total taxable income is up to Rs.7 lakh and chooses the new tax regime, they will be eligible for rebate of lower of the following:
an amount of income tax payable on his total income or
an amount up to Rs 25,000
Whereas a resident individual paying tax under optional tax regime (shifting out of the new tax regime) for the financial year 2023-24 and having a total taxable income of less than Rs 5 Lakh, rebate shall be lower of the following:
an amount equal to the amount of income tax payable on his total income or
an amount of Rs 12,500.
Under the new tax regime, in addition to above one more rebate cover is also available for individuals having total income just above Rs. 7 lakhs.
If the income of an individual exceeds Rs 7,00,000 and tax payable on such income is exceeding the income amount over and above Rs.700,000, then the tax will be limited to the extent of such income exceeding Rs. 7 lakhs.
Step I – Calculate excess above Rs. 7 lakhs Total income – Rs 7 Lakh (A)
Step II – Compute income-tax liability on total income (B)
Step III – if B>A rebate under section 87A would be (B-A).
Let’s try to understand this with below example
Mr. Ravi aged 36 years and a resident in India, has a total income of Rs 7,15,000, comprising his salary income and interest on bank fixed deposit. The tax liability for AY 2024-25 under the new tax regime is as follows.
Solution :
Particulars
Amount In Rs
Step I: Calculate excess above Rs. 7 lakhs (Rs 7,15,000 – Rs 7,00,000) Step II : Tax on total income of Rs 7,15,000 Tax on First Rs 3,00,000 – Nil Tax on next Rs 3,00,000 @ 5% – Rs 15,000 Tax on balance Rs 1,15,000 @ 10% – Rs 11,500 Step III : Since B>A, rebate u/s 87A would be (B-A) (Rs 26,500- Rs 15,000)
Claim a tax rebate under section 87A if your total income does not exceed Rs 7 lakh under the new tax regime & 5 lakh for the old tax regime (shifting out of the default tax regime)
The maximum rebate under section 87A for the AY 2024-25 is Rs 25,000 under the new tax regime and Rs 12,500 under the optional tax regime.
See the example below for rebate calculation under Section 87A.
Under the new tax regime, for individuals below 60 years of age for AY 2024 -25
*You can claim a deduction for tax-saving under Section 80C for eligible investments and expenditures, Section 80D for medical insurance, 80CCD for contribution to NPS, 80G for donations and other deductions to arrive at your total income.
Things to Remember while Availing Rebate Under Section 87A
The rebate can be applied to the total tax before adding a health and education cess of 4%
Only resident individuals are eligible to avail rebate under this section.
Senior citizens above 60 years and below 80 years of age can avail a rebate under Section 87A
The amount of rebate will be lower than the limit specified under Section 87A or total income tax payable (before cess)
Section 87A rebate is available under the old and the new tax regime
Long-term capital gains under Section 112 of the Income Tax Act. (Section 112 applies for long-term capital gains on the sale of any capital assets other than listed equity shares as well as equity-oriented schemes of mutual funds)
Short-term capital gains on listed equity shares and equity-oriented schemes of mutual funds under Section 111A of the Act, on which tax is payable at a flat rate of 15%.
Note: Rebate under Section 87A cannot be adjusted against tax on long-term capital gains on equity shares and equity-oriented mutual funds (Section 112A).
Eligibility to Claim Rebate u/s 87A for FY 2022-23
The tax rebate is limited to Rs 12,500. If your total tax payable is less than Rs 12,500, you will not have to pay any tax. Note that the rebate will be applied to the total tax before adding the health and education cess of 4%.
Here are a few calculations of Section 87A rebate for resident individuals (below 60 years of age) earning various levels of income:
Mr Ram is above 60 years, but below 80 years, the basic exemption limit is Rs 3 lakh. Further, he can adjust the basic exemption limit against LTCG on equity-oriented funds. However, the adjustment should be made against normal income, i.e. other than LTCG on equity-oriented funds. In this case, he has a pension income of Rs 60,000 (Rs 5,000 × 12) and LTCG on equity-oriented funds of Rs 4.7 lakh.
Thus, after adjusting the basic exemption limit with the pension income, adjust the balance limit of Rs 2.4 lakh against LTCG. The balance of Rs 2.4 lakh (Rs 3 lakh – Rs 60,000) will be adjusted against LTCG. Hence, after adjustment with LTCG on equity-oriented funds, the balance LTCG left is Rs 2.3 lakh (Rs 4.7 lakh – Rs 2.4 lakh). LTCG on equity-oriented funds is taxable at 10% on the LTCG above Rs 1 lakh, hence 10% tax is levied on Rs 1.3 lakh (Rs 2.3 lakh – Rs 1 lakh). A tax of Rs 13,000 is payable.
New Tax Relief: Finance Ministry Raises Income Tax Rebate to Rs 7 Lakh
Tax rebate in India: The Ministry of Finance announced a revision in Section 87A of the Income-tax Act, 1961. This section now ffers a tax rebate to individuals with an income up to Rs 7 lakh, effectively raising the previous limit of Rs 5 lakh.
Tax rebate in India: The Ministry of Finance announced a key amendment to the personal income tax regime, as outlined in the Finance Act, 2023. The announcement, made via a social media post, fulfills a significant promise from the fiscal year’s budget. The revision in Section 87A of the Income-tax Act, 1961, now offers a tax rebate to individuals with an income up to Rs 7 lakh, effectively raising the previous limit of Rs 5 lakh, ANI reported. ↓
A tax rebate is a refund or reduction in the amount of tax that an individual or entity owes to the government. Rebates can be used to stimulate economic activity, encourage investments in specific sectors, or provide relief to certain groups of taxpayers. Unlike tax deductions which reduce taxable income, a rebate directly reduces the tax liability, often resulting in a refund to the taxpayer.
This policy change, which is a part of the efforts to ease the tax burden on middle-income earners, was implemented by the Central Board of Direct Taxes (CBDT). The amendment is significant for the new tax regime, where individuals earning up to Rs. 7 lakh are now exempt from paying income tax. This shift is anticipated to benefit a wider range of taxpayers, potentially leading to increased disposable income and thereby stimulating economic growth. ↓
The increased rebate limit under the new tax regime is a strategic step towards tax relief for a larger section of the population, ANI reported.
The Ministry of Finance’s announcement has been well-received, as it aligns with the government’s broader goals of economic reform. By increasing the tax rebate limit, the government is taking a proactive approach to support the middle-income group, which forms a significant part of the country’s economic backbone. This policy is expected to have a positive impact on individual finances.
In the Union Budget 2023, Finance Minister Nirmala Sitharaman announced significant adjustments to the new income tax regime, including reduced tax rates and a tax rebate on annual income up to ₹7 lakh. The enhancement of the rebate for individuals subject to the new income tax regime from ₹5 lakh to ₹7 lakh was the most significant of the main announcements made by the finance minister. Additionally, FM announced a modification to the tax structure under the new tax regime by decreasing the number of tax slabs to five and raising the tax exemption threshold to ₹3 lakh. In contrast to the new income tax regime, the old tax structure’s tax slabs were not altered by the budget 2023. “We are also making the new income tax regime as the default tax regime. However, citizens will continue to have the option to avail the benefit of the old tax regime,” said FM Nirmala Sitharaman during her budget speech.
In addition, the new income tax bracket has added a standard deduction of ₹50,000 and a family pension deduction of up to ₹15,000 annually. This indicates that under the new income tax regime, a salaried individual would also be eligible for a lump-sum deduction of ₹50,000 from his or her total taxable income, which was previously only possible under the old tax regime.
Let’s find out how individual taxpayers can make the most from the old tax regime in terms of tax deductions for Assessment Year (AY) 2024-25 or for the income made in FY 2023-24., even as the government has made a number of changes under the new tax regime.
Tax saving investments for individuals under old tax regime
Based on an exclusive interview with Dr. Suresh Surana, Founder, RSM India, the spokesperson said in accordance with the provisions of the Income Tax Act, 1961 (‘IT Act’), individual taxpayers are offered several deductions under chapter VI-A on fulfilment of certain conditions. As per the prevailing laws, most of these benefits are restricted only to such individuals who continue with the Old Tax Regime. We have provided an overview of some of the most widely used and optimal tax saving instruments for individuals.
1. Section 80C – Deduction for certain specified Investments and Expenditures:
Section 80C of the IT Act is one of the most popular deductions amongst individuals as it offers investment-linked and expenditure-based deductions. Some of the investment-linked options under this section include Life Insurance Premium, Contribution to PPF, investment in Sukanya Samriddhi Yojana, Equity Linked Savings Scheme (‘ELSS’), investments in 5 years fixed deposits, etc.
Further, the section allows a deduction for expenditure incurred for Tuition fees paid for children’s education in India, stamp duty / registration charges, principal repayment of housing loans, etc. The total quantum of deduction under this section is restricted to Rs. 1,50,000 per Financial Year (FY) under this section. Majority of the taxpayer aims to avail full benefit under this section which can ultimately reduce their basic tax liability upto Rs. 45,000 (i.e. Rs. 1,50,000×30% – assuming they fall in the 30% tax bracket)
2. Section 80CCD(1b) – Deduction for National Pension Scheme
Individuals, who contribute to a notified National Pension Scheme, are granted additional relief of upto Rs. 50,000 under this section. Thus, an individual can effectively save tax on taxable income upto Rs. 2,00,000 per Financial Year i.e. ₹1,50,000 u/s 80C and ₹50,000 under this section.
3. Section 80TTA/80TTB – Deduction for Interest on Bank Accounts:
Almost every individual holds a Savings Account in some or the other bank and earns interest on the same. Further, as India is moving towards a cashless economy, lower and weaker section of the society are also encouraged to open and maintain a bank account.
As per section 80TTA, individuals who earn interest on savings account maintained either with a bank or a post office, can claim deduction upto Rs. 10,000 per FY. Further, Section 80TTB of the IT Act provides additional benefit to resident senior citizens, wherein it enhances the maximum limit of deduction to Rs. 50,000 per FY and also extends the benefit of interest received on time/fixed deposits.
