The most attractive announcement made in the Union Budget 2017 is reducing the income tax rate from 10% to 5% for the tax slab of INR 2.5-5 lakhs. This has caught the importance as most of the common taxpayers in India falls under this category.
Now, talking about other higher tax slabs, they have also got some relief as announced in budget 2017. Taxpayer falling into the income category, earning up to INR 50 lakhs will get a relief of INR 12,500 and taxpayer earning over INR 1 Cr will get a relief up to INR 14,806 with 15% surcharge. The income tax rates announced in this budget are estimated to benefit 2 Crores of Indian Taxpayers. On the other hand, the income tax slab of INR 50 lakhs – 1Cr will have to pay a surcharge of 10% where the tax group earning over INR 1Cr will remain in the same surcharge of 15%.
Also, the tax rebate has been reduced to INR 2,500 from INR 5,000 for the taxpayers with an income up to INR 3.5 lakhs. In simple words, the taxpayers, with an income of INR 3 lakhs will have a tax liability for INR 50,000 at a rate of 5% which will be an amount of INR 2,500. But due to the rebate announced for this tax group, they will have a zero tax liability after receiving the INR 2,500 rebate. So, the income group of INR 2.5-3 lakhs has not been affected in any way by this recent budget.
The people with incomes of INR 3.5 lakhs will have a tax liability of INR 5,000 which will be reduced to INR 2,500 after the rebate mentioned under Section 87A. No rebate has been offered to income group above the limit of INR 3.5 lakhs. Also, people who have invested in PPF, insurance policies and mutual funds can avail deductions up to INR 1.5 lakhs as mentioned under Section 80C. So, on that term, income group up to INR 4.5 lakhs can be tax-free by investing into these schemes. For income up to INR 5 lakhs have been offered the reduced tax rate of 5%, that will anyway save a lot in comparison to last fiscal year.