Finance Minister Arun Jaitley on Wednesday announced tax sops to individuals and companies in his budget speech.
Jaitley announced a reduction in the tax rate in the income tax slab of Rs 2.5 lakh to Rs 5 lakh to 5% from 10%. Lower income tax would mean more disposable income which in turn would lead to higher spending.
The impact of demonetisation is seen as a prime cause for the Government to give this rebate in income tax.
Earlier Tax slab:
Nil Tax up to Rs. 2.5 lakhs
10% tax on income above Rs. 2.5 lakhs but up to Rs. 5 lakhs
20% tax on income above Rs. 5 lakhs but up to Rs. 10 lakhs
30% tax on income above Rs. 10 lakhs
-An additional cess of 3% was also also applicable in all of the above slabs.
Changes in slabs:
Nil Tax up to Rs. 2.5 lakhs
A tax of 5% on income above Rs. 2.5 lakhs but up to Rs. 5 akhs
20% tax on income above Rs. 5 lakhs but up to Rs. 10 lakhs
30% tax on income above Rs. 10 lakhs
How Income up to Rs. 3 lakhs be tax free:
- There is nil tax on income up to Rs. 2.5 lakhs. If we are calculating tax on Rs. 3 lakhs, then we have to pay a ta of 5% on balancing Rs. 50,000.
- It will be Rs. 2,500.
- Government is allowing a deduction of Rs. 2,500/- on annual income up to Rs. 3 lakhs. That means there will be Nil tax on up to Rs. 3 lakhs.
Other moves in personal tax space were:
Surcharge of 10 percent of tax payable on categories of individuals whose annual taxable income is between Rs 50 lakhs and Rs 1 crore. The 15 per cent surcharge on incomes above Rs 1 crore will continue to be charged.
Simple one-page form to be filed as Income Tax Return for the category of individuals having taxable income up to Rs 5 lakhs other than business income.
All citizens to contribute to nation building by making a small payment of 5 percent tax if their income falls in the lowest slab of Rs 2.5 lakhs to Rs 5 lakhs.
