NEWS | Union Budget 2017-18: Income Tax rate halved to 5 percent for INR 5 Lakh Income Bracket

NEWS | Union Budget 2017-18: Income Tax rate halved to 5 percent for INR 5 Lakh Income Bracket

Various Sources

Image Attribute: Mr. Arun Jaitley, Union Finance Minister of India / Source: Youtube Screengrab

Image Attribute: The file photo - Mr. Arun Jaitley, Union Finance Minister of India
 Source: Youtube Screengrab

The Union Finance Minister of India, Arun Jaitley has relaxed the chargeable rates for taxpayers in the lower brackets of income tax slab. 

While presenting the Union Budget 2017-18 in the Parliament today, the Finance Minister said that the present burden of taxation is mainly on honest taxpayers and salaried employees who are showing their income correctly.

The Highlights:

Personal income tax in INR 2.5 lakh (1 Lakh = 100,000 | US$ 1 = INR 67.53, Date: Feb 2, 2017) - 5 lakh bracket has been reduced to 5 percent from 10 percent.

The minister further announced that there will be zero tax liability to people having annual income up to INR 3 lakh to avoid duplication of benefits for the Rs 2.5-R 5 lakh tax slab.

Earlier, the tax slabs had caps with an annual income of Rs 2.5 lakh, Rs 5 lakh, and Rs 10 lakh attracting income tax of 10 per cent, 20 per cent and 30 per cent respectively.

Those with annual income between Rs 50 lakh to Rs 1 crore will be levied a surcharge of 10 per cent. The 15 percent surcharge on incomes above Rs 1 crore will continue to be charged.

The New Tax Slab

Annual Income Income Tax  Education CessHigher Education Cess
Upto Rs 3 lakh  Nil Nil Nil
Rs 3-5 lakh  5% 2% 1%
Rs 5-Rs 10 lakh  20% 2% 1%
Above Rs 10 lakh  30% 2% 1%
Above Rs 50 lakh  30% + Surcharge of 10%
Above Rs 1 crore  30% + Surcharge of 15%

"In order not to have duplication of benefit, the existing benefit of rebate available to the same group of beneficiaries is being reduced to Rs 2500 available only to assesses up to income of Rs 3.5 lakh." Jaitley said during the revelation of Union Budget. He also added - "The combined effect of both these measures will mean that there would be zero tax liability for people getting income up to Rs 3 lakh p.a. and the tax liability will only be Rs 2,500 for people with income between Rs 3 and Rs 3.5 lakh. If the limit of Rs 1.5 lakh under Section 80C for investment is used fully the tax would be zero for people with income of Rs 4.5 lakh. While the taxation liability of people with income up to Rs 5 lakh is being reduced to half, all the other categories of tax payers in the subsequent slabs will also get a uniform benefit of Rs 12,500/- per person. The total amount of tax foregone on account of this measure is Rs 15,500 crores."

Reactions:

“This is a budget for the future—for farmers, underprivileged, transparency, urban rejuvenation, rural development, enterprise,” Modi said while commenting on the document presented by Arun Jaitley in the Lok Sabha (The Lower House of Indian Parliament).

"The new Union budget just presented by Arun Jaitley makes that income tax system more progressive." - Tim Worstall, Fellow at the Adam Smith Institute in London and Forbes Contributor.

C. Rangarajan, former governor of India's Reserve Bank of India, said it was a fairly routine budget. "There have not been much changes on the revenue side. Nevertheless, I am happy that the fiscal deficit is maintained at 3.2 per cent. The original road map has set it at 3 percent."
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