Explained: How the new Income Tax exemption will work

For those with a taxable income of up to Rs 5 lakh annually, the government has announced a one-time tax rebate.

In line with expectations, the Narendra Modi-led NDA government Friday stepped up rural funding and dished out income tax sops for the middle class in a bid to shore up its political support in its last budget before the general elections. Presenting the interim Budget, interim finance minister Piyush Goyal exempted people with an earning of up to Rs 5 lakh from payment of income tax, announced an annual cash dole-out of Rs 6,000 to small farmers and provided a monthly pension of Rs 3,000 to workers in the unorganised sector.

For those with a taxable income of up to Rs 5 lakh annually, the government has announced a one-time tax rebate. An individual falling in this bracket will have to file his/her income tax returns and will get a full rebate. The announcements result in tax saving of up to Rs 12,500 for all taxpayers.

If benefits under 80c are included, individuals with income of up to Rs 6.5 lakh will have to pay no tax. Besides, interest income of up to Rs 40,000 will attract no tax.