On 31 March 2017, Finance minister proposed to reduce the tax rate for individuals in the lowest income tax slab to 5% instead of 10% (Rs 2.5 lakh to Rs 5 lakh). The existing rebate under Section 87A as currently given to people with income up to Rs 5 lakh is proposed to be reduced to Rs 2500 from the present Rs 5000 for individuals earning between Rs 2.5 lakh to Rs 3.5 lakh. The existing benefit of rebate also available to the same group of beneficiaries is being reduced to Rs 2,500 for those with income up to Rs 3.5 lakhs.
Taxpayers with a gross taxable income of Rs 4.5 lakh can reduce their tax liability to zero by fully utilising the tax break under Section 80C combined with these new proposals.
Further, taxpayers falling in the higher income tax slabs will also be eligible for this lower tax rate of 5 percent on income between Rs 2.5 lakh and Rs 5 lakh. Therefore, those in the higher tax slabs will pay lower tax by Rs 12500 per person.
