Union Budget 2017-18: How tax proposals will affect you

New Delhi: While presenting the Union Budget for the financial year 2017-18, Finance Minister Arun Jaitley on Wednesday proposed to reduce  the existing rate of taxation for individual assesses between income of Rs 2.5 lakhs to Rs 5 lakhs to 5% from the present rate of 10%.

The change in the personal income tax rate for individual assessees would reduce the tax liability of all persons below Rs 5 lakhs to either to zero (with rebate) or 50 percent of their existing liability.

In order to avoid having duplication of benefits, the existing benefit of rebate available to the same group of beneficiaries is being reduced to Rs 2,500 available only to assesses up to income of Rs 3.5 lakhs.

The combined effect of both these measures will mean that there would be zero tax liability for people getting income upto Rs 3 lakhs per annum and the tax liability will only be Rs 2,500 for people with income between Rs 3 to Rs 3.5 lakhs.    

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 lakhs.

While the taxation liability of people with income up to Rs 5 lakhs 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. 

In order to make good some of this revenue loss on account of this relief, the government has proposed to levy a surcharge of 10% of tax payable on categories of individuals whose annual taxable income is between Rs 50 lakhs and Rs 1 crore.
 
The existing surcharge of 15% of tax on people earning more than Rs 1 crore will continue.

In the case of senior citizens above 60 years, there will be no tax up to Rs 3 lakh, while the exemption will be up to Rs 5 lakh in case of citizens above 80 years. Both the categories will attract income tax of 20 percent on income between Rs 5 lakh and Rs 10 lakh and 30 percent for income above Rs 10 lakh.

In order to expand the tax net, the Finance Minister also said that a 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.  

Also a person, who falls in this category and files income tax  return for the first time, would not be subjected to any scrutiny in the first year unless there is specific information available with the department regarding his high value transaction.   

Following is the table of impact on individual on tax proposals:

INCOME TAX RATE IMPACT

Individual Tax Payers

-Up to Rs 2,50,000: NIL NIL

-Rs 2,50,001 to Rs 5,00,000: 5% Rs 7,725 (Savings)

Senior Citizens 60 years but less than 80 years

-Up to Rs 3,00,000: NIL NIL

-Rs 3,00,001 to Rs 5,00,000: 5% Rs 2,575 (Savings)

-Rs 5,00,001 to Rs 10,00,000: 20% Rs 7,725 (Savings)

Senior Citizens 80 years and above

-Up to Rs 5,00,000: NIL NIL

-Rs 5,00,001 to Rs 10,00,000: 20% Rs 7,725 (Savings)