Budget 2017: Jaitley halves income tax for those earning Rs 2.5L-Rs 5L
Finance minister Arun Jaitley gave the salaried class a big relief in the 2017 budget, bringing down personal income-tax limits dramatically, a move aimed at softening the demonetisation blow.union budget Updated: Apr 26, 2017 11:37 IST
Finance minister Arun Jaitley on Wednesday gave marginal relief to the country’s taxpayers in the 2017 budget but disappointed those who expected big breaks to cushion the demonetisation blow.
Jaitley’s biggest tax announcement was halving of the lowest rate of personal tax to 5% for annual incomes between Rs 2.5 lakh and Rs 5 lakh.
“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,” said Jaitley. He left the exemption limit unchanged at Rs 2.5 lakh.
With the reduction, those earning Rs 3 lakh will continue to be exempt from paying taxes, as the government provides Rs 5,000 rebate under the income tax act to all those earning up to Rs 5 lakh. As of now, the tax on Rs 3 lakh income is Rs 5,000 but after the rebate of Rs 5000 the effective tax is nil.
With the reduction in the slab, all taxpayers earning more than Rs 5 lakh will get a benefit of Rs 12,500.
“While the taxation liability of people with income upto 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,” he said.
But, those earning between Rs 50 lakh and Rs 1 crore will now have to pay a surcharge of 10%.
The surcharge of 15% will continue for people with an income of Rs 1 crore and above. This is likely to give the exchequer an additional Rs 2,700 crore, Jaitley said.
“Fiscal prudence has prevailed over populism… budget continues the agenda of growth for all and focus on global and India realities,” Sonu Iyer, tax partner and people advisory services leader, EY India, said.
Jaitley recognised the contribution of the salaried class to the tax revenues but didn’t meet the expectation of standard deduction of tax payers, he said.
Stressing on the need to widen the tax base, Jaitley said India was largely a tax non-compliant society.
To simplify the procedure and encourage compliance, he announced a simple one-page form for individuals with taxable income of up to Rs 5 lakh.
Those with a taxable income of Rs 5 lakh and filing returns for the first time would be exempt from scrutiny in the first year “unless there is specific information available with the (IT) department regarding his high value transaction”, the minister said.
In India only about 1% out of 1.25 billion people pay taxes.
Among the 37 million individuals who filed tax returns in 2015-16, 9.9 million showed income below the exemption limit of Rs 2.5 lakh. Around two 19.5 million showed income between Rs 2.5 lakh and Rs 5 lakh. While 5.2 million showed income between Rs 5 lakh and Rs 10 lakh, and only 2.4 million declared income above Rs 10 lakh.
Of the 7.6 million individual who declared income of above Rs 5 lakh, 5.6 million are the salaried class.
The number of people showing income more than Rs 50 lakh in the country was only 172,000, Jaitley said.
“We can contrast this with the fact that in the last five years, more than 1.25 crore cars have been sold, and number of Indian citizens who flew abroad, either for business or tourism, is 2 crore in the year 2015,” he said.
The minister said data received post-demonetisation would be used to expand the tax base.
“After demonetisation, the preliminary analysis of data received in respect of deposits made by people in old currency presents a revealing picture. This data mining will help us immensely in expanding the tax net as well as increasing the revenues,” he said.