Finance Minister Arun Jaitley said he is slashing Income Tax paid by individuals by as much as 50% in some slabs.
In the starting slab of 2.5-5.0 lakh per year, the income tax rate has been brought down from 10% of income above Rs 2.5 lakh to 5% of income above Rs 2.5 lakh.
“If exemption under 80 c (for investments made in mutual funds and insurance up to 1.5 lakh) is utilized, tax will be zero for people with an income up to 4.5 lakhs,” Jaitley said as part of the budget presentation today.
This will require the taxpayer to invest Rs 1.5 lakh in a tax saving mutual fund or bank deposit or any other such investment.
All other categories of tax payers in subsequent brackets will get a benefit of 12,500 per year.
“In order not to have any duplication of benefit, existing benefit of rebate available to the same group of beneficiaries is being reduced to Rs 2,500, available only for assessees with income up to 3.5 lakhs. The combined effect of both these measures will mean that there will be zero tax liability for a person getting income up to Rs 3 lakh, and a tax liability of only Rs 2,500 for people with an income of Rs 3,00-3.50 lakh,” the minister said.
However, a surcharge of 10% will be imposed on people who earn more than Rs 50 lakh up to Rs 1 cr per year.
The tax filing form has also been simplified to a one-page affair, said Jaitley.