New Delhi: Finance Minister Arun Jaitley in his speech announced that he will reduce the tax rate of individuals earning between Rs 2.5 lakh to Rs 5 lakh to 5% from the current 10%. To part finance the additional burden on the governemnt for this tax relief, Finance Minister Arun Jaitley announced a surcharge of 10% for those earning between Rs 50 lakh and Rs 1 crore.
Finance Minister Arun Jaitley also announced some changes that would encourage affordable housing. The holding period for immovable property for LTCG has been reduced to 2 years. FM Jaitley said that his tax proposals are directed at providing relief to the middle class and to stimulate growth.
Tax and industry experts were already expecting that to assuage the demonetisation pains of the common man and alleviate their sufferings, some tax reliefs may be provided in the budget. Even Finance Minister Arun Jaitley had hinted in his speeches earlier that the tax burden on taxpayers may be lowered due to higher tax revenues being collected on account of cashless systems.
The FM had said that as future transactions in India would be substantially digital, the future taxation level would be much higher than the present one and “this would also enable the government at some stage to make taxes more reasonable which will apply to both direct and indirect taxes.”
Keeping all these things in view, some industry experts were expecting the government to increase the income tax exemption limit to Rs 4 lakh from Rs 2.5 lakh currently. The common expectation, however, was that the exemption limit will be raised from the current Rs 2.50 lakh to Rs 3 lakh per annum. Also, the subsequent slabs of 10, 20 and 30 per cent should be applicable to annual income range of above Rs 3 lakh and up to Rs 10 lakh, above Rs 10 lakh and up to Rs 20 lakh and above Rs 20 lakh, respectively.
Currently individual tax payers & HUF (less than 60 years) don’t need to pay any tax if they earn up to Rs 2.5 lakh. They need to pay 10 per cent tax if they earn between Rs 250,001 lakh and Rs 5 lakh, while 20 per cent tax is levied on the income ranging from Rs 500,001 to Rs 10 lakh and 30 per cent on an income above Rs 10 lakh.