Rebate: Fill & Download for Free

When I am home to spend college vacation, my brother of age 8 always sleeps with me. I usually do have a month long semester break; it's only once or twice in a year I am with my family these days. So he is all excited to hang out with me. We play football, watch cartoons, travel etc. He finds me very amenable and lovable, so do I.I couldn't sleep with him one night: I was staying at a friend’s house. For no reason I woke up so early and left for home. When I reached there and entered my bedroom, I saw my brother sleeping along side with my casual outfit just like below though I forgot to click that scene. Sorry !This is one of the sweetest things for me . After seeing him in such an adorable canvas I couldn’t stop myself from kissing on his forehead gently.My love for him is infinite and vice-versa.

There is a difference between the tax slab system and the rebate system. When Mr. Piyush Goyal was announcing the budget, there was an impression that the tax slab has been changed and that there is no income tax up to ₹5 lakh. That would have been a huge step, as such a large exemption limit has never been seen in the country as of now.However, the tax slab has not changed. What has changed is that the rebate allowed to people having income of up to ₹5 lakh has been increased to ₹12500. Effectively, this means that income of up to ₹5 lakh will not be charged. But that is applicable only in selected cases.In order to understand this, let’s start with the tax slab system.The slab system of taxation means that income is separated into blocks. Then these blocks are taxed at different rates. For example, if your income is ₹12 lakh, then it will be separated into following blocks:First block of ₹2.5 lakh, which will not be taxedSecond block of ₹2.5 lakh, taxed at 5%Third block of ₹5 lakh, taxed at 20%Fourth block of ₹2 lakh, taxed at 30%Effectively, your tax payable shall be ₹172500.The slab system decides the limits for separating these blocks. The exemption limit is up to ₹2.5 lakh - so that becomes the first block. The next block is from ₹2.5 lakh to ₹5 lakh (i.e. net ₹2.5 lakh taxed at 5%). The third block is from ₹5 lakh to ₹10 lakh (i.e. net ₹5 lakh taxed at 20%). The fourth block is anything above ₹10 lakh (i.e. ₹2 lakh in our example).Now, if the tax slab is changed, then it is applicable for all people. Even for those whose income is ₹10 lakh or above. Therefore, if the government had raised the basic exemption limit to ₹5 lakh, then the blocks would be changed for everyone, effectively saving a tax of ₹12500. The new blocks would have been different, like this:First block of ₹5 lakh, which will not be taxedSecond block of ₹5 lakh, taxed at 20%Third block of ₹2 lakh, taxed at 30%The effective tax would have been ₹160000 (i.e. everyone would have saved ₹12500 from their total tax expense in a year).But this has not happened.What has happened is that the rebate has increased.What is tax rebate?The rebate system is pretty straightforward. First, your income is computed net of all the investments. And then the tax is calculated. Thereafter, if your income is up to ₹5 lakh (net of all investments), then your total income tax is reduced by a maximum of ₹12500. That’s it.There are two important aspects here:The limit of ₹5 lakh is seen after taking into account all the deductions that are already given as per Section 80C.Rebate is applicable only if the net income, after such deductions, does not exceed ₹5 lakh. Otherwise the rebate is zero.Some examples will help to understand this.Let us assume that your income is ₹5 lakh, then the slab system means that your tax would be ₹12500. From this, a rebate is allowed of up to ₹12500 and the effective tax payable becomes zero. However, if your income is even slightly higher than ₹5 lakh, then the rebate shall not be allowed at all.Some examples of what this really meansIf your income is ₹6 lakh (before investing in any notified options), then the income tax payable by you shall not change at all.However, if your income is ₹6 lakh and you decide to invest ₹1 lakh in notified options, such as FD, then your tax payable shall be computed in the following manner:First block of ₹2.5 lakh, not taxedSecond block of ₹2.5 lakh, taxed at 5%Total tax ₹12500, minus rebate of ₹12500. Effective tax = 0.But, let’s say your income is ₹10 lakh, then your income tax payable shall not change at all. Because this rebate is not applicable in your case.Thus, the rebate system benefits only those people whose income is up to ₹5 lakh. Anything above that, is not covered here. On the other hand, if the slab rates had changed, then everyone would have benefited from it, regardless of their income level. That’s the difference.Reality check of the benefits this would createConsider a person whose income is ₹6.5 lakh. Normally, his income tax payable would be ₹42500 as per the slab system. Now, if he decides to invest ₹1 lakh under Section 80C, then the income tax payable would be ₹22500. If he decides to invest ₹1.5 lakh, however, the tax payable would be zero.The crux of the matter is that, for the benefit of tax rebate to kick in, you’d have to invest money on top of having a lower income. If your income is ₹6 lakh, you are earning about ₹50000 per month. In most companies, all the income is not available in cash. Some of it is in the form of perquisites.Moreover, one must also consider the expenses.For a person having an income of ₹50000 and surviving in a metro city, there is a cost of ₹20000 per month, at least, all things considered. That leaves them with ₹30000 per month to spare. Of this ₹360000, they would need to invest ₹150000 in various schemes as per Section 80C.This includes options that come not without cost:Provident fund is a high return option, but the lock-in period is very long. This means you can’t access your funds for a long time.Investing in fixed deposits has a lesser lock-in period of 5 years, but then the return on that investment is not lucrative. If, for example, you get a tax benefit of ₹12500 by investing in a FD, that translates into a benefit of 8% for one year. If you divide it by 5, you get an effective interest rate of about 1.6% - which is just what you get by investing in a one year FD. In short, it’s not that lucrative considering that your money would be blocked for 5 years.Alternatively, you could invest in insurance plans. This is good, and every person must have insurance. The problem is that unless you’re insuring a lot of money, you cannot hope to invest much in such avenues. Because insurance is not a worthy investment (usually) for a person that young. Especially if it’s ULIP.There is also an option to invest in mutual funds, but that’s risky, and I usually don’t advice a person having incomes of up-to ₹5 lakh to go broad on risks without securing a base.Bottom line is: this is an additional incentive for people to invest. But it’s applicable for people who don’t have a lot of breathing space to invest. There are commitments that you have to fulfil now, and so often money is not available for investing at all. That is sad.I don’t want to sound all gloomy, though. It’s a good move. All I wanted to do is to emphasise that it’s not as great as it is purported to be, we need to be realistic in order to assess the benefit of this.EditI was probably not clear. A lot of people are getting confused about this. The truth is simple - you get a rebate of ₹12500 if your total income (after investment) is less than ₹5 lakh. If your income even before investment is less than ₹5 lakh, then you will get the rebate of ₹12500.My calculations regarding the investments was only illustrative. Don’t take every figure seriously. Just understand the law.

Yes. I was looking for an SUV and went to the local Jeep dealership. I was met at the door by a gentleman who informed he was from the company and told me of their rebates on new Grand Cherokees. They were substantial. I met a salesperson and we proceeded to “build” a Grand Cherokee and advised that he has one in the system and could have it at their dealership in a week. He presented the price to me. There were no rebates. I asked if this was his best price and he said yes so I got up and left. I purchased a Lexus that day. As I was driving home the salesman called and said that maybe they could move on the price. I asked him if the move was roughly for the rebates that customers were told about at the door. He was silent then said yes. I advised him that he had lost me as a customer and hung up.