Budget 2018 has proposed to hike cess on income tax from 3% to 4% thereby increasing the tax payable by all categories of tax payers. Due to this change, the tax liability for highest tax bracket (assuming Rs 15 lakh income) goes up by Rs 2,625. For the middle income tax payers (between Rs 5 lakh and Rs 10 lakh), tax liability increases by Rs 1,125, and for the lowest bracket (Rs 2.5 lakhs to Rs 5 lakhs) by Rs 125.
Here’s is a look at how your tax liability will be affected post-budget announcements:
Currently, a cess of 3% of income tax payable is added to the tax liability. This 3 per cent is made up of 2 per cent of education cess and 1 per cent of senior secondary education cess.
As per the current income tax slabs, taxation of income of resident individuals below 60 years is as follows: Income upto Rs 2.5 lakh is exempt from tax, 5 per cent tax on income between Rs 250,001 to Rs 5 lakh; 10 per cent tax on income between Rs 500,001 and Rs 10 lakh; and 30 per cent tax on income above Rs 10 lakh.
For senior citizens ( aged 60 years or above but less than 80 years), income up to Rs 3 lakh is exempt from tax. Income from Rs 300,001 to Rs 5 lakh is taxed at 5 per cent, from Rs 500,001 to Rs 10 lakh at 20 per cent and above Rs 10 lakh at 30 per cent.
For super senior citizens, aged 80 years and above, income up to Rs 5 lakh is exempt from tax. Income from Rs 500,001 to Rs 10 lakh is taxed at 20 per cent and above Rs 10 lakh is taxed at 30 per cent.
A surcharge on income above Rs 50 lakh is also payable in all cases.
If Budget 2018’s proposal is passed by the Parliament, then these tax changes would impact the tax-outgo of the taxpayers starting from the financial year 2018-19(Assessment year 2019-2020).
The last budget had reduced tax rate for the lowest income slab of Rs 2.5 lakh to Rs 5 lakh from 10 per cent to the current rate of 5 per cent.
Along with reduction in the tax rate, the last budget also reduced the rebate under section 87A to Rs 2,500 from Rs 5,000 for those earning between Rs 2.5 lakh to Rs 3.5 lakh. Surcharge at 10 per cent was also imposed in the last budget on income between Rs 50 lakh and Rs 1 crore.
The current income tax slabs and rates for the financial year 2017-18 (Assessment year 2018-19) are as follows:
Source:- Economics Times