Handing out a Rs. 26,000-crore bonanza to individual and corporate taxpayers, Finance Minister Pranab Mukherjee on Friday proposed a major restructuring of the income tax slabs, giving relief to nearly 60 per cent of the taxpayers and also effecting a reduction in corporate tax surcharge.
Investment up to Rs. 20,000 in long-term infrastructure bonds would fetch tax exemptions over and above the existing Rs. 1 lakh limit, the Minister announced in his budget.
According to the new estimates, while there will be no tax for income up to Rs. 1.6 lakh, a 10 per cent tax will be levied on income up to Rs. 5 lakh, 20 per cent on income up to Rs. 8 lakh and 30 per cent on income beyond that level. As per the existing structure, there is no tax on income up to Rs. 1.6 lakh, 10 per cent tax is levied on income up to Rs. 3 lakh, 20 per cent up to Rs. 5 lakh and 30 per cent thereafter.
Mr. Mukherjee also reduced the surcharge on corporate tax from 10 to 7.5 per cent. He had done away with the surcharge on income tax last year.
However, the Minister raised minimum alternate tax (MAT) from 15 to 18 per cent on the book profits of companies which are not coming under the tax net because of various exemptions.
Mr. Mukherjee said the changes in the tax slabs would benefit 60 per cent of taxpayers. Changes in the personal income tax slabs would help taxpayers save 4-6 per cent of their tax outgo.
However, the changes in slabs as proposed in the draft Direct Tax Code (DTC) would be much steep as it suggested a 10 per cent tax on income between Rs. 1.6 lakh and Rs. 10 lakh, 20 per cent on up to Rs. 25 lakh and 30 per cent on income beyond that.
On the other hand, corporates are not upbeat about the proposal as, they said, what the government gave them by reducing surcharge was taken back by the increase in MAT.
An individual earning up to Rs. 8 lakh would save as much as Rs. 50,000 in a year on income tax outgo. The saving will be Rs. 20,000 on tax if the income/salary is up to Rs. 5 lakh annually.
Following are a comparison between the old and new slabs and the savings therein:
Income Rs. 5 lakh: old slab — Rs. 55,620 (men), Rs. 52,530 (women) and Rs. 47,380 (senior citizens); new slab — Rs. 35,020 (men), Rs. 31,930 (women) and Rs. 26,780 (senior citizens); saving: Rs. 20,600 (men), Rs. 20,600 (women) and Rs. 20,600 (senior citizens).
Income Rs. 8 lakh: old slab — Rs. 1,48,320 (men), Rs. 1,45,230 (women) and Rs. 1,40,080 (senior citizens); new slab — Rs. 96,820 (men), Rs. 93,730 (women) and Rs. 88,580 (senior citizens); saving: Rs 51,500 (men) Rs. 51,500 (women) and Rs. 51,500 (senior citizens).
Income Rs. 11 lakh and above: old slab — Rs. 2,41,020 (men), Rs. 2,37,930 (women) and Rs. 2,32,780 (senior citizens); new slab — Rs. 1,89,520 (men) Rs. 1,86,430 (women) and Rs. 1,81,280 (senior citizens); saving: Rs. 51,500 (men) Rs. 51,500 (women) and Rs. 51,500 (senior citizens).
