Budget 2016 Income Tax Cheat Sheet (assumptions): At a time when there are expectations that the government may bring down the corporate tax rate, salaried employees would expect some tax relief from the finance minister in this year’s Budget so that they have more disposable income in their hands. At present (FY16), individuals below 60 years or Hindu Undivided Family earning up to Rs 2.5 lakh a year do not have to pay any tax, those earning between Rs 2.5 to 5 lakh a year pay tax at the rate of 10%; between Rs 5 to 10 lakh at the rate 20% and those above Rs 10 lakh a year at 30%.
Here are four assumptions based on our readers’ wish list.
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If the government increases the slab by Rs 50,000
If the finance minister increases the slab rate by Rs 50,000, like the way he did in February 2014 for FY15, then individuals below 60 years with an annual income from Rs 5 lakh to 1 crore, at one stroke can save Rs 5,150 a year. Individuals earning above Rs 1 crore a year can save a bit more – Rs 5,665 a year. At present, individuals earning up to Rs 2.5 lakh do not have to pay any tax. From Rs 2.5 to 5 lakh the tax rate is 10%; between 5 to 10 lakh it is 20%. And for income above Rs 10 lakh, the tax rate is 30%.
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If the government increases the slab by Rs 1,00,000 If the finance minister is more generous this year and increases the slab by Rs 1,00,000 across all income bracket, then there will be more disposable income in the hands of individuals. Individuals below 60 years with an annual income from Rs 5 lakh to 1 crore will benefit by Rs 10,300 a year and those with annual income above 1 crore can save up to Rs 11,330 a year.
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If the govt changes the tax rate and follows rates suggested in original DTC
If the finance minister wishes to align the current tax rate to the ones suggested in original Direct Taxes Code, 2009, then individuals earning below Rs 1 crore can save as much as 1,96,730 a year. Individuals earning between Rs 3 to 5 lakh can save Rs 11,330 a year; those earning Rs 8 lakh can save 21,630 and higher savings as income level goes up. The original DTC had proposed nil tax for income up to Rs 1.6 lakh; 10% for income between 1.6 to 10 lakh; 20% between Rs 10 to 25 lakh and 30% for income above Rs 30 lakh.
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If the govt changes the tax rate and follows rates suggested by Standing Committee on DTC
If the government wants to align the current tax rate to the rates suggested by the Standing Committee on DTC, then an individual salaried employee earning up to Rs 5 lakh can earn Rs 3,090; those earning up to Rs 8 lakh can save Rs 36050 a year, those with an annual salary of Rs 10 lakh can save Rs 56,650 and so on. The Standing Committee on DTC in 2010 had suggested nil tax for income up to Rs 3 lakh lakh; 10% for income between 3 to 10 lakh; 20% between Rs 10 to 20 lakh and 30% for income above Rs 30 lakh.
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