In welcome news for the salaried class, Finance Minister Arun Jaitley on Wednesday announced in his budget speech that the income tax liability for salaried individuals earning between Rs 2.5 to Rs 5 lakh will be reduced from 10% to 5%.
The tax rebate for this income bracket meanwhile has been reduced to Rs 2500, from Rs 5000. All other categories will get a uniform benefit of Rs 12,500 per person.
This means that for those who earn up to Rs 3 lakh, there will be zero tax liability. Further, there will be no tax on those who earn annual income of Rs 4.5 lakh and use rebates.
Jaitley said that the present burden of taxation was on salaried employees and those who show income correctly. Therefore, he proposed the above measure to bring some relief to the salaried class.
In an added incentive to promote the payment of taxes, the FM said that there will be no scrutiny on first-time taxpayers.
Simplifying the tax filing procedure, individuals earning less than Rs 5 lakh can file their tax returns on a one page form, he added.
There is an additional surcharge of 10% for those whose annual income is Rs 50 lakh to Rs 1 crore while the existing surcharge of 15% on people earning more than Rs 1 crore will continue.
The FM said that on account of the income tax changes, the net revenue foregone by the government is Rs 12,800 crore.