Budget 2017 saw the Finance Minister announcing a cut in income tax rates from the current 10% to 5% in the Rs 2.5 lakh-Rs 5 lakh income band and reducing the rebate from tax to Rs 2500.
This translates to a maximum of Rs 14807 in income tax benefits, but this is for those in the Rs 1.2 crore-plus annual pay bracket. How much of a benefit will it offer the more modest tax payers in different pay bands.
First, a look at the new income-tax slabs:
Let us pull out relevant portions from Jaitley own speech to explain how this would ease the tax burden:
"... there would be zero tax liability for people getting income up to Rs 3 lakhs per annum (Editor's note: The new tax of Rs 2500 minus the Rs 2500 rebate) and the tax liability will only be Rs 2500 for people with income between Rs 3 and Rs 3.5 lakhs (Editor's note: The new tax of Rs 5000 minus the Rs 2500 rebate).
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 12500/- per person. "
There is an important rider. Those with annual taxable incomes between Rs 50 lakh and up to Rs 1 crore will now have to pay a newly announced surcharge of 10% to offset this loss of revenue. So, they will pay extra.
The 15% surcharge on incomes above Rs 1 crore stays.
The views of Parizad Sirwalla, Partner and Head of Global Mobility Services, KPMG in India on the tax proposals in Budget 2017: