What Is The Basic Exemption Limit For Income Tax?

The basic exemption limit refers to the threshold income level below which an individual is not required to pay income tax in India. This limit varies based on the taxpayer's age and the prevailing tax rules for a specific financial year. The government revises this exemption limit as part of the annual budget, and it determines how much income is exempt from tax.

Basic Exemption Limit for Income Tax:

For Individuals Below 60 Years of Age:

For individuals below 60 years of age, the basic exemption limit is ₹2.5 lakh per annum. This means that if the total annual income is up to ₹2.5 lakh, no tax is payable.

For Senior Citizens (60 years or above but below 80 years):

Senior citizens are given a higher basic exemption limit. For individuals aged 60 years or above but below 80 years, the exemption limit is ₹3 lakh per annum.

For Super Senior Citizens (80 years or above):

Super senior citizens, who are 80 years of age or older, enjoy the highest exemption limit, which is ₹5 lakh per annum.

Rebate Under Section 87A:

Individuals with taxable income up to ₹5 lakh are eligible for a rebate of ₹12,500 under Section 87A, which effectively reduces their income tax liability to zero if their taxable income is within this limit.

Summary of Exemption Limits (for Financial Year 2024-25):

• Below 60 years: ₹2.5 lakh
• 60 years or above but below 80 years: ₹3 lakh
• 80 years or above (Super Senior Citizens): ₹5 lakh

Example:

Let’s consider Mr. Ramesh, a 58-year-old individual:

• Total Income: ₹2,00,000
• Since his income is below ₹2.5 lakh, Mr. Ramesh would not be required to pay any income tax under the basic exemption limit.

If Ms. Meera, a senior citizen aged 65, has an income of ₹3,00,000:

• Since the basic exemption limit for her is ₹3 lakh, she would not have to pay any income tax either.

Important Notes:

• Income Tax Calculation: The basic exemption limit is just the threshold for tax liability. If the total income exceeds the exemption limit, the individual is taxed based on the applicable tax slabs for their income group.
• Tax Slabs and Cess: Even if an individual qualifies for the exemption, they may need to pay other taxes like cess (Health and Education Cess) on their taxable income.
• Income Sources: The exemption applies to the total income, which includes all types of earnings such as salary, business profits, rental income, etc.