Changes in Tax Structure Brings Relief to Common Taxpayers

Changes in Tax Structure Brings Relief to Common Taxpayers

In the current Union Budget announced by our Finance Minister Arun Jaitley, several changes in the prevailing tax regime were made. These changes included a much-awaited reduction in the tax exemption limit for salaried individuals. The tax rates for personal income tax are left unchanged but exemption limit on personal income tax was raised from Rs 200,000 to Rs 2,50,000 for individuals below 60 years of age (both men and women). The new tax deduction scheme for those below 60 years of age is as below:

  1. No income tax would be levied upto an income of Rs 2,50,000 for persons below 60 years of age.
  2. Income tax would be levied at the rate of 10% on a person earn from anywhere between Rs 2,50,001 to Rs 5,00,000.
  3. Income tax would be levied at the rate of 20% on a person earning in the range of Rs 5,00,001 to Rs 10,00,000.
  4. Levied at the rate of 30% on a person earning above Rs 10,00,000.

Income tax exemption limit for senior citizens (aged between 60-80 years) was raised from Rs 2,50,000 to Rs 3,00,000 in the current budget 2014-15. The new tax scheme for senior citizens is as below:

  1. A senior citizen need not pay any income tax upto an annual income of Rs 3,00,000.
  2. Tax would be levied at the rate of 10% for senior citizens earning in the range of Rs 3,00,001 to Rs 5,00,000.
  3. Tax would be levied at the rate of 20% for senior citizens earning between Rs 5,00,001 to Rs 10,00,000.
  4. Tax would be deducted at the rate of 30% for senior citizens with an annual income of above Rs 10,00,000.

Income tax exemption limit for very senior citizens (above 80 years) is left unchanged. Still, for the benefit of readers we have enumerated the details below:

  1. No tax would be levied for very senior citizens upto an annual income of Rs 500,000.
  2. Income tax would be levied at the rate of 20% for very senior citizens earning anywhere between Rs 500,001 to Rs 10,00,000.
  3. Income tax would be levied at the rate of 30% for very senior citizens with an annual income in excess of Rs 10,00,000.

There is also an additional surcharge for super-rich with an annual taxable income in excess of Rs 1 crore which is left unchanged in this budget. To protect those earning just a little above Rs 1 crore against a high surcharge, there is also a provision of marginal relief. This limits the surcharge to be not more than the amount by which taxable income exceeds Rs 1 crore. Apart from this surcharge, an education of cess of 3% would also be deducted on total income tax.

Other important announcements to promote personal savings and investment are as below:

  1. Tax-exempted investment limit under section 80C is raised from Rs 100,000 to Rs 150,000. This exemption is applicable for all income earning groups.
  2. Tax exemption on investment in Public Provident Fund (PPF) increased from Rs 100,000 to Rs 150,000 under section 80C.
  3. Tax deduction limit on account of interest on housing loan for self-occupied property is raised from Rs 150,000 to Rs 200,000.