Budget 2017 has proposed a change in the tax rates applicable to the slab Rs. 2.5 lakhs to Rs. 5 lakhs from 10% to 5%. Hence now the slab of Rs. 2.5 lakhs to Rs. 5 lakhs will be taxed at the rate of 5%. The rebate u/s 87A is also revised to Rs. 2,500 and is now available to taxpayers with income up to Rs. 3.5. lakhs. This leads to a zero tax liability on an income of Rs 3,00,000.
Please refer to the calculations below for income tax on an income of Rs 3 lakhs.
Tax on income up to Rs. 2.5. lakhs – 0
Tax on income between Rs. 2.5 lakhs to Rs. 3 lakhs – Rs. 50,000 x 5% = Rs. 2,500
Rebate available u/s 87A on this tax Rs. 2,500
Hence tax laibility will be = 0
Slabs for tax exemption haven’t changed at all in Budget 2017. The basic slab exempt from tax still remains at Rs. 2.5 lakhs. The only change has been in the rate of tax applicable to the first slab of Rs. 2.5 lakhs to Rs. 5 lakhs. The rate has come down from 10% to 5%.