Finance Minister Nirmala Sitharaman today presented the first Budget of the Modi 2.0 government. The government did not make any change in income tax slabs but increased the surcharge on high-networth individuals. According to the Budget proposals, income tax surcharge on individuals having taxable income above ₹2 crore will have to pay higher surcharge, thus leading to higher effective tax rate for them. Earlier, tax payers with taxable income between ₹50 lakh and ₹1 crore lakh had to pay an additional surcharge of 10% and those with income above ₹1 crore, 15%.
But according to the Budget proposals, those earning between₹2-5 crore, will have to pay a higher surcharge of 25%, from 15%, increasing the effective tax rate by around 3%. Similarly, those earning above ₹5 crore will have to shell out a surcharge of 37%, from current 15%, an increase of around 7% in effective tax rate.
As seen from the table below, there is no change in income tax liability for those with net income of ₹2 crore. But the effective rate for those with net income between ₹2 crore to ₹5 crore goes up 3% and for those with above ₹5 crore by 7%.
Income tax slabs for individuals below 60 years:
Individuals below the age of 60 continue to enjoy tax-free income of up to ₹2.5 lakh, and for those earning between ₹2.5 lakh to ₹5 lakh will have to pay a tax of 5%, for income between₹5 lakh and ₹10 lakh, the tax outgo will be of 20% while any income above ₹10 lakh attracts an income tax of 30%.
Senior citizens have to pay nil tax for income up to ₹3 lakh and for super senior citizens, the exemption is up to ₹5 lakh.
How income tax is calculated
Remember that your entire income doesn’t get taxed at one rate. Say, you are below 60 years and your total taxable income is ₹15 lakh. Without factoring in any tax benefits, ₹2.5 lakh will attract zero tax. The next ₹2.5 lakh will be taxed at 5%, which amounts to ₹12,500.