Context
Uniform benefit of ₹12,500 per person for all other categories of taxpayers
What has happened?
In the Union Budget 2017-18, a proposal has been made under which, those earning between 2.5 lakh and ₹5 lakh a year will now have to pay income tax at the rate of 5% instead of the earlier 10%
Further proposals
- Benefits to other categories also: All the other categories of tax payers in the subsequent slabs will also get a uniform benefit of ₹12,500 per person
- Rebate reduced& slab changed: Existing rebate for those earning 5 lakh or less will now be reduced to 2,500 and available only to those earning an income of up to ₹3.5 lakh
- Surcharge to be levied: It has been proposed to levy a surcharge of 10% of tax payable on those whose annual taxable income is between 50 lakh and 1 crore. The existing surcharge of 15% of tax on people earning more than 1 crore will continue
Reduced tax liability
- The combined effect of the reduced tax rate and the rebate of ₹2,500 will mean that those earning up to ₹3 lakh a year will effectively see their tax liability fall to zero (a tax incidence of ₹2,500 at 5% of ₹50,000 minus the rebate of ₹2,500)
- Those earning between ₹3 lakh and ₹3.5 lakh will have a tax liability of 2,500 (a tax incidence of ₹5,000 minus a rebate of 2,500)
