In recent development, India’s honourable Finance Minister, Arun Jaitley presented the much awaited Budget 2017. In this Budget, several changes were made in the income tax system for those earning an income. One of the major moves noticed in the Budget was reduction of taxation rate for those earning an income between Rs 2.5 lakh and Rs 5 lakh from 10 per cent to the earlier 5 per cent. Furthermore, an extra surcharge of 10 per cent will be charged for those earning a yearly income between Rs.50 Lakhs and Rs.1 Crore. Moreover, the rule of 15 per cent surcharge for those with earnings over Rs.1 Crore per year stands intact from last year. Experts believe that the move of adding surcharge of 10 per cent for those with yearly income between Rs. 50 lakhs and 1 Crore will compensate for the Rs.15000 crore loss that will occur due to the rebate in tax rate.
In this article, we will reveal how to calculate your income tax after the changes have been made in the tax slab that will come into effect after April 1, 2017.
Changes in Tax Slabs
The changes in the income tax slab has certainly brought a smile to the faces of tax payers, especially those earning taxable income less than Rs 5 lakhs per year. Earlier, the tax rate charged on people earning between Rs.2.5 lakhs to Rs. 5Lakhs was 10%. Now this rate has been reduced to 5%. This is sure to help Individuals save a sizeable part of their income from getting depleted at the time of taxation.
Rebate under section 87A
As per the changes made by the income tax department, tax deduction under the section 87A of the Indian Income Tax Act, 1961 has been reduced from Rs. 5000 to Rs. 2500. Now this rebate is only available to those resident Indians whose income is equal to or below Rs. 350000. This reduction was earlier available to those with income Rs. 500000. Given this change, the tax benefit available for those with taxable income of Rs.350000 is Rs. 2575 and for those with income of Rs. 500000 is Rs. 7725.
Partial Pension Exemption
Yet another change that is sure to spell bliss for pensioners is the partial exemption on pension. In order to ensure maximum savings for pensioners, it has been proposed that the pensioners be given an exemption for partial withdrawal. However, it must not exceed 25% of the total contributions made by the employee.
Section 80CCD Deductions for Self-employed People
To bring both employed and self-employed individuals, the income tax department has decided to make changes in the Section 80CCD of the Income Tax Act. Now the upper limit of 10% of the gross total income has been increased to 20% of the gross total income for self-employed individuals. In accordance with the changes, contributions made towards NPS for as much as 20% of the gross total income will be allowed for self-employed individuals.
Removing Tax Implications for HUF
Yet another change proposed by the finance minister is to withhold tax at the rate of 5% for individuals or HUF, not liable for tax audit, in the event of rent exceeding Rs.50000 per month or part of month on rent payment. Also, such individuals or HUFs will not be required to provide TAN number. Here, it is important to remember that under section 206AA of the income tax act, the maximum quantum of tax deduction must not exceed the rent paid for last month of the previous year.
These are just five of the many changes that have been made in the income tax system in order to make things easier for tax payers. The bold move by the finance minister and the income tax department is already been applauded by the tax payers in the country. It would be interesting to see how people are now able to make the maximum benefit of the changes made in the income tax rules.
We are sure this article will help you calculate your income tax accordingly after the 1st of April 2017.