Finance Minister Arun Jaitley’s fourth budget came up as a damp squib with just a little tinkering in personal income tax for a section of tax payers, contrary to people’s expectation of a big bang budget with large sops for tax payers.
With demonetisation, there was large scale hope that there would be several measures to ease the tax burden on individuals. This included an increase in the basic exemption limit beyond Rs 2.5 lakh, a re-jigging of the tax slabs and a reduction in the overall tax across all slabs. Instead, the finance minster has just slashed the personal income tax for those earning an income of Rs 2.5 lakh to Rs 5 lakh from the existing 10 per cent to 5 per cent.
This will bring cheer for all those who are earning under Rs 5 lakh. But according to the Finance Minister, this will benefit a majority of tax payers considering that out of 3.7 crore who file income tax returns, 1.95 crore or 52 per cent earn between Rs 2.5 lakh and Rs 5 lakh according to estimates given by Jaitley.
This reduction of 5 per cent in personal income tax in that slab will result in tax benefit of Rs 12,500 which will be applicable for all categories of income tax payers.
The Finance Minister has also created a new category of those earning between Rs 50 lakh and Rs 1 crore where the net tax will be of 33.99 per cent including a 10 per cent surcharge. For those earning above Rs 1 crore, the surcharge remains unchanged at 15 per cent and the net tax will amount to 35.5 per cent.
One of the objectives of the government was to increase the tax base. That explains why it has not increased the basic exemption limit as any increase in the basic exemption limit would have thrown some people out of the tax net.
Though there are several measures in housing which will benefit individual tax payers, the lack of net benefits in taxes across slabs will not make many people happy.