Income Increases in Disguise- With the Increase in the Basic Exemption Limits

Smiling faces were seen when Finance Minister Arun Jaitley tabled his maiden Budget in Parliament on 10 July. Indeed, the Budget lived up to the BJP’s promise of ushering in ‘achche din’. The basic exemption limit for ordinary taxpayers has been raised from Rs 2 lakh to Rs 2.5 lakh. For senior citizens above 60 years, the limit has been increased from Rs 2.5 lakh to Rs 3 lakh. There is no change in the Rs 5 lakh tax exemption for very senior citizens above 80 years old.   images

Those in the lowest tax bracket still have something to smile about. The budget has not removed the Rs 2,000 tax relief given in Budget 2013 to those earning below Rs 5 lakh a year. This means that individuals earning up to Rs 4.2 lakh a year and investing Rs 1.5 lakh under Section 80C will go out of the tax net.

Senior citizens have always had a special place in Indian society. This aspect has been acknowledged and respected even by the Indian tax laws, which attempt to cushion our elders by easing the tax paying and compliance process for them through certain benefits and deductions.

 

DETAILED LOOK AT THE TAX SLABS FOR ASSESSMENT YEAR 2015-16 

  1. Tax Slab for an Individual (resident & below 60 years) or HUF/AOP/BOI/AJP

 

Income Slabs Tax Rates
Total income up to Rs. 2.5 Lac 0% Tax
Total income above Rs. 2.5 Lac and below Rs.5 Lac 10% on amount exceeding Rs. 2.5 Lac
Total income above Rs. 5 Lac and below Rs.10 Lac 20% on Income exceeding Rs. 5 Lac + Rs. 25,000
Total income more than Rs. 10 Lac 30% on Income exceeding Rs. 10 Lac + Rs. 1,25,000

* u/s 87A the Individual having taxable income up to Rs. 5 Lac , can claim rebate, on the Actual Tax amount subject to a maximum of Rs.2,000 

 

  1. Tax Slab for an Individual ( 60 years & above but below 80 years)

 

Income Slabs Tax Rates
Total income up to Rs. 3.00 Lac 0% Tax
Total income above Rs. 3.00 Lac and below Rs.5 Lac 10% on amount exceeding Rs. 3.00 Lac
Total income above Rs. 5 Lac and below Rs.10 Lac 20% on Income exceeding Rs. 5 Lac + Rs. 20,000
Total income more than Rs. 10 Lac 30% on Income exceeding Rs. 10 Lac + Rs. 1,20,000

* u/s 87A the Individual having taxable income up to Rs. 5 Lac , can claim rebate, on the Actual Tax amount subject to a maximum of Rs.2,000 

3. Tax Slab for an Individual (80years & above)

Income Slabs Tax Rates
Total income up to Rs. 5 Lac 0% Tax
Total income above Rs. 5 Lac and below Rs.10 Lac 20% on Income exceeding Rs. 5 Lac
Total income more than Rs. 10 Lac 30% on Income exceeding Rs. 10 Lac + Rs. 1 Lac

 

For all the above cases:

  • The amount of Income-tax shall be increased by Education Cess of 3% on Income-tax.
  • If the Taxable Income exceeds Rs. 1 crore, Surcharge @ 10% of Income tax is applicable.

 

So whereas the income in the hands of individual remains the same but the taxes paid by them will be minimized in a good extent. Surely, with this increase in the basic exemption limit there will be an increase in our income yet in disguise.

The more we save, the more we can spend and surely it is an increase in our income!!

Also, if you require our assistance in the filing of Income Tax return filing, please check here .

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