Finance Minister Arun Jaitley has made changes in the tax that you pay from the next financial year. The very obvious change that he has made is the massive reduction in tax rate to 5% from 10% for individuals (below 60 yeras) earning between Rs 2.5 lakh to Rs 5 lakh annually.
While the taxation liability of people with income upto Rs 5 lakhs is reduced to half, from Rs 5,000 to Rs 2,500.
For taxpayers whose income Rs 3 lakh, there will be zero tax liability.
Rs 2.50 lakh to Rs 3.50 lakh a rebate of Rs 2,500 will be available as against the earlier rebate of Rs 5,000 for the tax payers with an income upto Rs 5 lakh. What this effectively means is that resident individuals with an income of Rs 3 lakh will have a Nil tax burden and if one avails the Rs 1.50 lakh deduction under section 80C then there is no tax for income upto Rs 4.50 lakh.
The new income tax slabs are:-
Income between Rs 2.5 lakh and Rs 5 lakh
The taxpayers earn up to Rs 3 lakh, there will be zero tax liability.
The taxpayers earn between Rs 3 lakh and Rs 3.5 lakh, their tax liability will be Rs 2,500.
The taxpayers earn up to Rs 4.5 lakh and invest the maximum of Rs 1.5 lakh under Section 80C, they will not have to pay tax.
Starting next year, the taxpayers will have to fill a simple one-page Income Tax Return form the taxpayers, who are filing income tax returns for the first time, they will not be subjected to any scrutiny for the first year.
Income above Rs 5 lakh
No change in tax slab, so the taxpayers will continue paying 20 percent tax on their earnings.
They will receive a benefit of Rs 12,875.