The income tax we pay is based on our gross total income and the income tax slabs announced by the government in the budget at the beginning of every year. The tax slabs have been changed for the financial year(FY) 2017-2018. The union finance minister Arun Jaitely has announced lower income tax rates for individuals earning between Rs. 2.5-5 lakhs during his budget speech on Feb 1, 2017. What does this change in income tax slabs for FY 2017-2018 (assessment year 2018-19) mean for you and me? How much more money will you have in hand. This blog post will answer this question.
According to the latest income tax slabs, persons with annual income up to Rs. 3 lakh will not have to pay income tax and those having income between Rs. 2.5-5 lakhs will be charged income tax at 5%. Persons with annual income between Rs. 50 lakh to Rs. 1 crore will have to pay a surcharge of 10%. Those with income above Rs. 1 crore will continue to be charged a levy of 15%.
The table below lists the normal tax slabs applicable in financial year 2017-18.
| Income Slab | Tax Rate |
|---|---|
| Income up to Rs 3,00,000 | Nil |
| Income from Rs. 2.5 lakh to 5 lakhs | 5% of (Total income – 2,50,000) |
| Income from Rs. 5 lakh to Rs. 10 lakh | Rs.12,500 +,20% of (Total income – 5,00,00) |
| Income above Rs. 10 lakh | Rs. 1,12,500 + 30% of (Total income – 10,00,000) |
| Income above Rs. 50 lakh | Rs. 1,12,500 + 30% of (Total income – 10,00,000) + 10% surcharge |
| Income above Rs. 1 crore | Rs. 1,12,500 + 30% of (Total income – 10,00,000) + 15% surcharge |
Now lets compare it with the income tax slab for financial year 2016-2017. As you can see from the table below if you fall in the 20% or the 30% slab you can save up to Rs. 12,500 per year as a result of this change.
| Income Slab | Tax Rate |
|---|---|
| Income up to Rs. 2.5 lakh | Nil |
| Income from Rs. 2.5 lakh to 5 lakhs | 10% of (Total income – 2,50,000) |
| Income from Rs. 5 lakh to Rs. 10 lakh | Rs.25,000 +,20% of (Total income – 5,00,00) |
| Income above Rs. 10 lakh | Rs. 1,25,000 + 30% of (Total income – 10,00,000) |
| Income above Rs. 1 crore | Rs. 1,25,000 + 30% of (Total income – 10,00,000) + 15% surcharge |