New Delhi: While presenting the 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%.
This would reduce the tax liability of all persons below Rs 5 lakh income either to zero (with rebate) or 50% of their existing liability.
In order not to have duplication of benefit, the existing benefit of rebate available to the same group of beneficiaries is being reduced to Rs 2,500 available only to assessees upto 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 and 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.
The total amount of tax foregone on account of this measure is Rs 15,500 crores.
In order to make good some of this revenue loss on account of this relief, the government 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. This is likely to give additional revenue of Rs 2,700 crores.
In order to expand 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 upto Rs 5 lakhs other than business income.
Also a person of this category who 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.
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