In a relief to individual tax payers, the government on Friday changed the slabs cutting the rate to 10 per cent for income up to Rs 5 lakh, while leaving the threshold limit for tax-free income unchanged at Rs 1.6 lakh.
The income between Rs 5 lakh to Rs 8 lakh will attract 20 per cent tax against the current slab of Rs 3 lakh to Rs 5 lakh.
Hitherto, the income between Rs 1.6 lakh and Rs 3 lakh was taxed at the rate of 10 per cent. In case of income over Rs 8 lakh, tax would be levied at a rate of 30 per cent -- which was hitherto applicable on income above Rs 8 lakh.
Income Tax slabs proposed by the FM:
| Income | Tax rate |
| General tax payer | |
| Up to Rs 160,000 | NIL |
| Rs 160,001 to Rs 500,000 | 10 per cent |
| Rs 500,001 to Rs 800,000 | 20 per cent |
| Rs 800,001 and above | 30 per cent |
| For women | |
| Up to Rs 190,000 | NIL |
| Rs 190,001 to Rs 500,000 | 10 per cent |
| Rs 500,001 to Rs 800,000 | 20 per cent |
| Rs 800,001 and above | 30 per cent |
| For senior citizens of 65 years & above | |
| Up to 240,000 | NIL |
| Rs 240,001 to Rs 500,000 | 10 per cent |
| Rs 500,001 to Rs 800,000 | 20 per cent |
| Rs 800,001 and above | 30 per cent |
FM cuts I-T rates, relief for consumers
The tax concessions would put more money in the hands of consumers. Finance Minister Pranab Mukherjee also extended income tax exemption to investment in infrastructure bonds by up to Rs 20,000 over and above the existing limit of Rs 1 lakh.
The Finance Minister said the changes in tax slabs would benefit 60 per cent of taxpayers. The changes in personal income tax slabs would help taxpayers save 4-6 per cent of their tax outgo, experts said.
Mukherjee's proposals sent cheers among taxpayers as they were not expecting any major changes before the implementation of the Direct Taxes Code, which is likely to come in to force from April 1, 2011.
However, the changes in slabs as proposed in draft DTC would be much steeper as it suggested 10 per cent tax on income between Rs 1.6 lakh and Rs 10 lakh, 20 per cent on up to Rs 25 lakh and 30 per cent on income beyond that.
On the other hand, corporates were not upbeat on the proposal as they said what the government gave them by reducing surcharge has been taken back from increase in MAT.
FM cuts I-T rates, relief for consumers
However, it has increased the Minimum Alternate Tax (MAT) from existing 15 per cent to 18 per cent on book profits of those companies which do not pay tax because of various exemptions.
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