The month of February started out with a bang with Finance Minister Piyush Goyal announcing a full tax exemption for those having a net taxable income of up to Rs. 5 lakh, during this year’s interim budget announcement.
Currently, a full income tax rebate is applicable to those having a net taxable income of up to Rs. 2.50 lakh, only.
While the move by the government was initially met with a lot of cheer, the fine print makes it clear that there will be no relief for middle income taxpayers having a net taxable income of Rs. 5 lakh and above, after deductions.
They will continue to pay tax according to the existing tax structure, which suggests that the threshold limit will also remain unchanged at Rs. 2.5 lakh. Therefore, those earning above Rs. 5 lakh will be taxed at 5% from Rs 2.50 lakh to Rs. 5 lakh and 20% from Rs. 5 lakh to Rs. 10 lakh, and so on.
Income tax exemptions are also currently applicable for senior citizens between the age of 60 and 80 years upto a net taxable income of Rs. 3 lakhs and super senior citizens above the age of 80 years with a net taxable income of upto Rs. 5 lakhs.
For more information on the current income tax slab rates and structure, click here .
During Budget 2017, then Finance Minister Arun Jaitley had announced a reduction of income tax for those with net taxable income between Rs. 2.50 lakh to Rs. 5 lakh from 10% to 5%, providing a relief of Rs. 12,500.
Following this year’s budget, taxpayers falling under this slab will be relieved of another Rs. 12,500 that they paid in income tax.
Using data provided by the income tax department, it appears that the total population falling under the newly exempted income tax slab amounts to 2.49 crore.
Source: Income Tax Department of India
Finance Minister Goyal suggested that this would benefit a total of 3 - 3.5 crore people, referring to the entire population exempted from paying income tax following this year's budget.
Click here more information on this year’s interim budget.