Budget 2017: How Jaitley became the darling of the middle classes

From slshing of income-tax rates to filing made simpler, Jaitley delivered plenty of good news

Giving details of proposals on personal income tax, the Finance Minister Arun Jaitley on Wednesday said that the existing rate of taxation for individual applicants whose income ranges between Rs 2.5 lakh and Rs 5 lakh will be reduced to 5% from the present rate of 10%. 

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.  In order not to have duplication of benefit, the existing benefit of rebate available to the same group of beneficiaries is being reduced to Rs 2,500 available only for those with income up to Rs 3.5 lakh. 

The combined effect of both these measures will mean that there would be zero tax liability for people getting income up to Rs 3 lakh per annum.  Tax liability will be Rs 2,500 for people with income between Rs 3-3.5 lakh.  If the limit of Rs 1.5 lakh under Section 80C  for investment is used fully, the tax would be zero for people with income of Rs 4.5 lakh. 

While the taxation liability for people with income up to Rs 5 lakh is being reduced to half, all other categories in the subsequent slabs will also get a uniform benefit of Rs 12,500 per person.  The total amount of tax foregone on account of this measure is Rs 15,500 crore, Jaitley said. 

A surcharge of 10 per cent would be imposed on taxpayers whose annual taxable income is between Rs 50 lakh and Rs 1 crore.  The existing surcharge of 15 per cent on people earning more than Rs 1 crore will continue.  This is likely to give an additional revenue of Rs 2,700 crore. 

A simple one-page form to be filed as Income Tax Return will be made for the category of Individual having taxable income up to Rs 5 lakh other than business income.  

Also, a person of filing under this category for the first time would not be subjected to any scrutiny in the first year unless there is specific information regarding high-value transactions against the applicant. 

Jaitley appealed to all citizens of India to contribute to nation-building by making a small payment of 5 per cent tax if their income is falling in the lowest slab of Rs 2.5 lakh to Rs 5 lakh.  The Finance Minister further announced that in line with the exemption available to the Prime Minister’s Relief Fund and certain other funds, the income of the Chief Minister’s Relief Fund or the Lieutenant Governor’s Relief Fund shall be exempted from tax.