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Income tax changes: More savings on home loans and more tax on the super rich

Prabhjote Gill | Business Insider India | Jul 5, 2019, 01.18PM IST

  • There is no change in the income tax slabs for the common citizen but Union Budget has introduced savings from home loans and more tax on the super rich.
  • Housing loans will be now be deductible for another ₹1.5 lakh.
  • Incomes between ₹2-5 crore will face an effective tax impact of 3% and incomes above ₹5 crore will have to pay another 7%.

During the interim budget, the Indian government already extended the non-taxable slab upwards of ₹500,000.

Nirmala Sitharaman, the current Minister of Finance, thanked taxpayers for being responsible and for their due diligence but made no announcement to change the income tax slabs any further.

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However, she did announce an additional deduction of ₹1.5 lakh on housing loans bringing up the total deduction to ₹3.5 lakh.

And the country’s super rich are going to be subject to higher taxes. If their income falls between ₹2-5 crores, they will be subject to an effective tax impact of 3%. Any income beyond ₹5 crores will have to pay another 7%.

She highlighted that the revenue from tax has increased from ₹6.38 crores in 2013-14 to 11.37 crores in 2017-18, growing at a double digital rate every year.

Going forward, the government aims to further simplify the process of paying taxes and applying greater transparency.

Last time around, Piyush Goyal, the interim finance minister who presented the budget, also clarified that even people will gross income of upto ₹650,000 may not be required to pay any income tax if they make investments in provident funds, specified savings and insurance etc.

Goyal added that this move will allegedly provide tax benefit of ₹185 billion to an estimated 30 million Indian middle-class taxpayers.

Essentially, you won’t have to pay any tax if you have ₹7.5 million tucked away in fixed deposits and no other income because you'll only be earnings ₹450,000 a year assuming an interest rate of 6%.

In 2014 budget, the minimum tax exemption limit was raised from ₹200,000 to ₹250,000. Along with that, the limit under 80C was hiked by ₹50,000 to ₹150,000. - so essentially, individuals can reduce up to ₹150,000 from their total taxable income.

Cuts in income-tax rates have invariably resulted in higher revenues in the past, and there is no reason why they should not generate a similar response in the future.

India has generally been a non-compliant society, where avoiding and evading tax plague the economy. A tax cut is a temporary incentive for both since it drives down the incentive to avoid compliance.

Income tax slab for individual tax payers aged less than 60 years (FY 2018-19 AY 2019-20)

Income range per annum

Tax rate

Up to Rs. 2.5 lakhs

No Tax

From Rs. 2.5 lakhs to Rs.5 lakhs

5% + 4% cess

From Rs. 5 lakhs to Rs. 10 lakhs

20% + 4% cess

From Rs. 10 lakhs to Rs. 50 lakhs

30% + 4% cess

From Rs. 50 lakhs to Rs. 1 crore

30% + 10% surcharge + 4% cess

Above Rs.1 crore

30% +15% surcharge + 4% cess

Rebate as per Section 87 (A)

100% tax rebate is allowed for a maximum value of Rs. 2,500 in case of resident individuals whose total income is not above Rs. 3.5 lakhs


Income tax slab for senior citizens aged between 60 and 80 years (FY 2018-19 AY 2019-20)

Income range per annum

Tax rate

Up to Rs. 2.5 lakhs

No Tax

From Rs. 2.5 lakhs to Rs.5 lakhs

5% + 4% cess

From Rs. 5 lakhs to Rs. 10 lakhs

20% + 4% cess

From Rs. 10 lakhs to Rs. 50 lakhs

30% + 4% cess

From Rs. 50 lakhs to Rs. 1 crore

30% + 10% surcharge + 4% cess

Above Rs.1 crore

30% +15% surcharge + 4% cess

Rebate as per Section 87 (A)

100% tax rebate is allowed for a maximum value of Rs. 2,500 in case of resident individuals whose total income is not above Rs. 3.5 lakhs


Income tax slab for senior citizens aged above 80 years (FY 2018-19 AY 2019-20)

Income range per annum

Tax rate

Up to Rs. 2.5 lakhs

No Tax

Up to Rs. 5 lakhs

No Tax

From Rs. 5 lakhs to Rs. 10 lakhs

20% + 4% cess

From Rs. 10 lakhs to Rs. 50 lakhs

30% + 4% cess

From Rs. 50 lakhs to Rs. 1 crore

30% + 10% surcharge + 4% cess

Above Rs.1 crore

30% +15% surcharge + 4% cess


Income tax slab for firms and domestic companies (FY 2018-19 AY 2019-20)

Tax category

Firms

Domestic companies

Turnover up to Rs. 50 crores

30%

25%

Turn over above Rs. 50 crores

30%

30%

Surcharges

If the total income exceeds 1 crore, 12% of tax is applied as surcharge

7% of tax if income exceeds 1 crore but is below 10 crore.10% of tax in case the income exceeds Rs. 10 crores

Cess

3% of tax + surcharge

3% of tax + surcharge




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