Union Budget 2017-18: Income Tax rate halved to 5 per cent for Rs 2.5-5 lakh slab

The Budget has proposed to reduce income tax rate from 10 per cent to 5 per cent for people having income between Rs 2.5 lakh to Rs 5 lakh.

To much joy of tax payers in the lower brackets of income tax, Finance Minister Arun Jaitleyhas relaxed the chargeable rates.

Personal income tax in Rs 2.5 lakh - 5 lakh bracket has been reduced to 5 per cent from 10 per cent.

Jaitley further announced that there will be zero tax liability to people having annual income up to Rs 3 lakh to avoid duplication of benefits for the Rs 2.5-R 5 lakh tax slab.

Also read: Highlights of Arun Jaitley's Union Budget 2017-18 speech in Parliament

Earlier, the tax slabs had caps at annual income of Rs 2.5 lakh, Rs 5 lakh and Rs 10 lakh attracting income tax of 10 per cent, 20 per cent and 30 per cent respectively.

Those with annual income between Rs 50 lakh to Rs 1 crore will be levied a surcharge of 10 per cent.

The 15 per cent surcharge on incomes above Rs 1 crore will continue to be charged.

After today's announcement the following tax slabs will be applicable:

Annual Income	Income Tax	Education Cess	Higher Education Cess
Upto Rs 3 lakh (for senior citizens)	Nil	Nil	Nil
Rs 2.5-5 lakh	5%	2%	1%
Rs 5-Rs 10 lakh	20%	2%	1%
Above Rs 10 lakh	30%	2%	1%
Above Rs 50 lakh	30%	+ 10% surcharge
Above Rs 1 crore	30%	+ 15% surcharge

Also read: Union Budget 2017 made easy for you in 10 slides

ARUN JAITLEY'S PROPOSAL FOR INCOME TAX

I, therefore, propose to reduce the existing rate of taxation for individual assesses between income of Rs 2.5 lakh to Rs 5 lakh 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 2500 available only to assesses up to income of Rs 3.5 lakh. The combined effect of both these measures will mean that there would be zero tax liability for people getting income up to Rs 3 lakh p.a. and the tax liability will only be Rs 2,500 for people with income between Rs 3 and Rs 3.5 lakh. 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 lakh. While the taxation liability of people with income up to Rs 5 lakh 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, I propose to levy a surcharge of 10% of tax payable on categories of individuals whose annual taxable income is between Rs 50 lakh 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, I also plan to have a simple one-page form to be filed as Income Tax Return for the category of individuals having taxable income up to 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. I appeal to all citizens of India to contribute to Nation Building by making a small payment of 5% tax if their income is falling in the lowest slab of Rs 2.5 lakh to Rs 5 lakh.

WHAT ELSE IS THERE IN BUDGET 2017

1. An amendment was proposed to the RBI Act to enable the issuance of electoral bonds for political funding.
2. Political parties will be entitled to receive donations by cheque or in the digital mode from their donors.
3. Maximum cash donation any party can receive will be Rs 2000 from one source.
4. A single one-page form for filing IT returns for taxable income up to 5 lakh rupees.
5. No cash transaction of above Rs 3 lakh will be allowed.
6. Income tax for small companies with an annual turnover of 50 crore has been slashed by 5 per cent to 25 per cent.
7. Capital gains tax to be exempted, for persons holding land from which land was pooled for creation of Andhra Pradesh capital at Amravati.
8. Aadhar-enabled payment system will be launched soon.
9. The lending target of Pradhan Mantri Mudra Yojana has been doubled to Rs 2.44 lakh crore for 2017-18.
10. Total expenditure of Budget 2017-18 has been placed at Rs 21.47 lakh crore.