Tax hikes for the super –rich and tax cuts for the lower income group. The budget 2017 has scored high when it comes to relief from the cash crunch for farmers, small traders and all those who fall under the less than 3 lac p.a income group. Taking a clearer look on what this would actually mean for these income groups………….
- On the outset if you are someone with an income of INR 3,00,000/- or less p.a then you do not pay any Income Tax as per Budget 2017. Now that’s a sixer.
- Note, that there are no conditions to avail the benefit. An individual in this income group is under no mandate to make any investments to avail this tax benefit. The individual gets to keep all that he earns and spend it the way he desires.
However, once the individual slab rates on taxes were announced, the cut- off at 2.5 lakhs, raised a lot of confusion initially. But the rebate under Sec 87A comes to our rescue and redeems us from all the doubt. To understand this better let’s look at the revised tax slabs and rates under the 2017 Budget.
Chaitanya is a stores assistant at a private company who earns INR 3,00,000/- p.a . According to the above mentioned income tax slab, Chaitanya will pay INR 2500 as tax under the tax slab 2.5-5 lakhs. However, under Sec 87A if the income of a resident Indian does not exceed 3,50,000/- p.a and if the total income tax payable is INR 2500/- or less then the Individual can avail a rebate on the tax payable. In Chaitanya’s case, his income is less than 3,50,000/- per annum and his total tax payable is only 2500/- which is eligible for a rebate under Sec 87A thereby making his income totally tax – free!
Here’s Chaitanya’s Tax Slab ………
Budget 2017 gives the lower income groups tangible tax benefits. With a reduction in taxes from 10% to 5 % in the 2.5 lakh to 5 lakh bracket, the individual in this income group also saves more on taxes. The rebate of 2500/- for individuals whose total income does not exceed 3.5 lakhs will either decrease the tax by 50% or make it zero. Assuming an individual earns INR 4.5 lakhs per annum and has exhausted the Sec 80C limit of 1.5 lacs,will mean he pays zero tax.
Anjana is a Marketing Manager at a reputed bank let’s see what her total tax liability would be in the tax slabs under Budget 2017
Working out Anjana’s tax slab…
Anjana will save 12875/- according to the new tax slab.
While the 2017 Budget has been easy on the small income salaried group while offering considerable tax savings for the middle income group, it has come down heavily on taxes for the super –rich. The income group earning 50 lakhs and less than a crore, which was earlier under the tax bracket of 10 lacs to 1 crore is now facing an additional 10% surcharge. This income group was earlier exempt from any exclusive surcharge. The 15% that was levied for individuals with an income above INR 1 crore remains the same.
Assuming an Individual who earns 60,00,000/- p.a as salary, is eligible for a tax deduction totaling to 4,35,000/- the total tax payable would be as follows : (Net taxable income – 56,10,0000)
Work your tax liabilities under the Budget 2017, with a Certified Financial Planner and plan your finances accordingly.