Acting along expectations of the common man, especially after demonetization, the government has reduced the personal income tax rate for those in the tax slab of Rs 2.5 lakh to Rs 5 lakh to 5% from 10% earlier.
The Union Budget 2017-18 aims to reduce the tax liability for those earning up to Rs5 lakh to either zero or by half.
Currently, the basic exemption limit for individuals below 60 years of age is Rs2.5 lakh. The first slab rate, of 10%, applies to taxable income between Rs2.5 lakh and Rs5 lakh.
This translates into a tax liability of Rs25,000. But in financial year (FY) 2017-18, this rate will be 5%, thus reducing the tax liability by Rs12,500 for everyone.
A cess of 3% will continue to apply. The tax rate for individuals with income between Rs2.5 lakh and Rs5 lakh will be 5%.
