Income Tax Slabs and Rates AY 2018-19 (Budget FY 2017-18)

 

Income Tax Slab for FY 2017-18 for Male, Female, Senior Citizen and HUF

The Union Budget of FY 2017-2018 is one of the greatest events of calendar year 2017-2018. There are anticipations and there are expectations. There are suggestions and demands. All eyes are on finance minister Arun Jaitley, who is himself in a tight situation because this budget in going to be a historic budget. There are various factors that are all set to make the budget a historic and difficult one. Those factors include: Demonetization, Merger of Railway Budget with National Budget, GST implementation and more. On top of that, early budget means truncated economic data, which adds another level of pressure because less data will mean myopic view of economy’s proximate future.

The actual changes made in taxation in Budget 2017-2018

Unfortunately for those who had been thinking that government will listen to all proposed changes and implement the same, things went in a different direction. Finance Minister Arun Jaitley has made the announcement and for taxpayers, it has been a serious disappointment. The following changes have been announced in Budget 2017-2018:

  • For people with income range of INR 2.5 lakhs and INR 5 lakhs: Applicable income tax rate will be 5% instead of existing 10%. But there is an exemption of 2500 rupee which means if your 3 lakhs then you have to pay zero tax
  • INR 12,500 tax rebate will be allowed for people who are in 50 lakhs tax bracket.
  • People with annual income of INR 50 lakhs to INR 1 crore will have to pay 10% surcharge.
  • People with annual income of INR 1 crore will continue to pay surcharge of 15%.
  • People with annual taxable income below INR 5 lakhs will now be greeted with just 1-page long tax filing form.

No other changes have been made in taxation under Budget 2017-2018. So, if you have been expecting something else, there isn’t anything else in store.

Income Tax Slabs

With all these factors, Arun Jaitley needs to deal with another problem – economic slowdown caused by demonetization of INR 500 and INR 1000 currency notes. This bold demonetization drive led to a condition where nation spending (consumer level) dropped significantly. As consumption dropped, so did demand and hence, the supply end of the tail started taking hit! Manufacturing industry took some hit. It was a ripple effect. Arun Jaitley needs to come up with some serious measures to boost economic growth.

There are several ways for doing the same:

  • Increase government spending. This will have a risk of out of control government spending and increased fiscal deficit.
  • Increase disposable income through increase in taxable income slab – this will have a problem of low tax revenue for government.
  • Increase government spending through increased revenue and sticking to fiscal deficit target as spelled out by FRBM Act.

There are many other options but, these are the most important ones.

Highly Anticipated – Increase in Disposable Income

One of the most highly anticipated moves is that of increasing the disposable income of the consumers. With higher disposable income, consumers will have more money to spend and hence, they will start demanding. This will push up the demand side of the scale. Economy strives for a balance or an equilibrium in demand and supply. If demand increases, there should be an increase in supply and this will boost the production industries.

There are three major ways of increasing disposable income:

  • Increase the money supply – which the government won’t do because it will cause economic troubles.
  • Reduce the tax rates itself. This will require complete overhaul of the tax structure. This too is not a logical viability.
  • Finally, increase the taxable income slab. This will ensure that people can save more and hence, spend more.

It is the third option that has been suggested by the FICCI or Federation of Indian Chambers of Commerce and Industry. According to FICCI, India currently has the lowest income slab for highest tax rate in the world. This simply means that for 30% tax, the income slab in India is set to be INR 10 lakhs and above while for that tax rate, the rest of the world has an income slab of INR 20 lakhs and above. This needs immediate rectification.

FICCI also said that because of 15% surcharge on people having 1+ crore rupees’ income in a year, people tend to relocate and this dampens the scopes of entrepreneurship in India and hence, the tax structure in India needs a bit of change and that surcharge should be remove.

Existing and recommended tax slabs

Income tax slabs For Male, Female, HUF, NRI (Below 60 years of age)

Income slab Rate of Income Tax Education Cess Secondary Education and Higher Education Cess
Income < INR 250,000 NIL NIL NIL
INR 250,000 to INR 500,000 10% 2% of income tax payable 1% of income tax payable
INR 500,001 to INR 10,00,000 20% of income + INR 25,000 2% of income tax payable 1 % of income tax payable
Income > INR 10,00,000 30 % of income + INR 125,000 2% of income tax payable 1 % of income tax payable
Applicable for

·         Resident individuals,

·         Non-resident individuals,

·         Resident HUFs,

·         Non-resident HUFs,

·         BOI,

·         AOP,

·         Artificial juridical persons

(all below 60 years of age).

Income Tax Slabs for Senior Citizens (Age 60 to 80 Years)

Income slab Rate of Income Tax Education Cess Secondary Education and Higher Education Cess
Income < INR 300,000 NIL NIL NIL
INR 300,000 to INR 500,000 10% 2% of income tax payable 1% of income tax payable
INR 500,001 to INR 10,00,000 20% of income + INR 20,000 2% of income tax payable 1 % of income tax payable
Income > 10,00,000 30 % of income + INR 120,000 2% of income tax payable 1 % of income tax payable
Applicable for

·         Resident individuals belonging to greater than 60 years and less than 80 years range.

Income Tax Slabs for Super Senior Citizens (Age 80 Years and Above)

Income slab Rate of Income Tax Education Cess Secondary Education and Higher Education Cess
Up to INR 500,000 NIL NIL NIL
Between INR 500,001 and INR 10,00,000 20% of income 2% of income tax payable 1 % of income tax payable
Above INR 10,00,000 30 % of income + INR 100,000 2% of income tax payable 1 % of income tax payable
Applicable for

·         Resident individuals above 80 years of age.

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