In a major relief to the tax-burdened middle-class people, Finance Minister Arun Jaitley on Wednesday proposed to halve the income tax to five percent for those earning between Rs 2,50,000 and Rs 5,00,000 per annum.
Presenting the 2017-18 Budget in the Lok Sabha, Jaitley said he proposes to halve the income tax for persons earning between Rs 2.5 lakh-Rs 5 lakh from the current 10 percent.
This will reduce the tax liability of all people with incomes below Rs 5,00,000 either to zero (with rebate) or 50 percent of their existing liability.Jaitley
The existing benefit of rebate available to the same group of beneficiaries is being reduced to Rs 2,500 that is available only to assesses up to an annual income of Rs 3,50,000.
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According to him, the combined effect is that there will be no tax liability for people with incomes of up to Rs 3,00,000 per annum.
The tax liability will only be Rs 2,500 for people with incomes between Rs 300,000 and Rs 350,000. If the limit of Rs 1,50,000 under Section 80C for investment is used completely, the tax would be zero for people with incomes of Rs 4,50,000.
While the tax liability of people with incomes of up to Rs 5,00,000 is being reduced to half, all other categories of taxpayers 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.
In an effort to somewhat make good the loss of revenue, Jaitley proposes to levy a surcharge of 10 percent of tax payable on individuals whose annual taxable income is between Rs 50 lakh and Rs 1 crore.
The surcharge will generate additional revenue of Rs 2,500 crore.
The existing surcharge of 15 percent of the tax on people earning more than Rs 1 crore will continue.
For those with incomes of up to Rs 5,00,000 -- other than business income -- Jaitley said a single-page income tax return form will be introduced.
Another woe of the taxpayers is that provisions applicable on dishonoured cheque under Section 138 of the Negotiable Instrument Act are ineffective.
New effective way to tackle the issue of bounced cheque is a welcome move which shall relieve those facing hardship on these fronts, she added.
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