The Union Budget 2017, has focused more on rural India and agriculture as expected. However, the Finance Minister, Mr Arun Jaitley has not disappointed the urban population and Corporate India, as he has made various announcements to benefit them. This is very clearly visible, from the way the Stock Market has behaved, Today.
While we all were expecting the Modi Government to move up the personal income tax exemption from INR 2.5 lakhs to INR 4 lakhs, the Government instead came up with a very intelligent move to encourage more people to come under the Income Tax Net.
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A research conducted by IndianMoney.com very recently, revealed that people in the income bracket of INR 2 lakhs to INR 8 lakhs, mostly file their IT returns for various reasons like to avail a loan, or to get their TDS refund, than just Tax compliance. Therefore this important move by the Government, will surely encourage more people to disclose their income, as the tax liability by doing so would be very less.
I would love to give you an illustration to explain this better. Let us say your annual net income is INR 8 lakhs and the taxable income is INR 5 lakhs after availing deductions allowed under section 80C, 80D and other tax exemptions. If you go by earlier tax rates, you would have ended up paying INR 25,000 in tax, but now this will be reduced to just INR 12,500, which means effectively for such people the total income tax outflow has gone down by 50%.
We must recollect the fact that there are only 24 lakh people in India, who are currently disclosing a taxable income of above INR 10 lakhs. This means that this major announcement by the Government has reduced the personal income tax liability of over 99.8% of our population by 50%.
I strongly believe that this great move is going to lead India to bring down the personal income tax rates in the coming years, which means if this shows promising results, the Government may go ahead and bring down the tax rates to 10-15% on taxable income between INR 5-10 lakhs in the coming budgets.
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Further, during the Financial Year 2014-15, there were 1.61 Crore people, whose TDS (Tax Deducted at source) was deducted, but they did not file IT returns. I am sure this shocking statistic might have pushed the Government to simplify the IT Return form for people whose taxable income is less than INR 5 lakhs. The Finance Minister has announced Today, that those who have taxable income of less than INR 5 lakhs, will just have to file a simple 1 page ITR form, which is expected to encourage more people to file their Tax returns.
While other rules and exemptions remain the same under Personal Income Tax, there is an announcement on the introduction of 10% surcharge on the tax payable for those, whose taxable income is between INR 50 lakhs to INR 1 crore. This may help the Government to recover almost 16% of the revenue lost due to reduction of tax rate on taxable income between INR 2.5 lakhs to 5 lakhs.
Overall, considering all the announcements made by Mr Arun Jaitley, he has managed to meet the expectations of a large segment of the population and now we will have to wait and watch, how these initiatives will be implemented. After all, only successful implementation will make a difference. Be Wise, Get Rich.
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