The Budget 2018 has proposed no changes in the income tax slabs and rates for FY 2018-19. However, cess has been increased to 4 per cent from 3 percent across the board for taxpayers. Due to the hike in cess, the tax liability for the highest slab (assuming an income of Rs 15 lakh) has increased by Rs 2,625. In the middle income tax slab, the tax outgo increases by Rs 1,125 and there is a nominal increase in the tax liability of Rs 125 for lowest tax slab.
Here’s how much your income tax liability will be as per the proposed announcements in the budget:
These proposals will come into effect from the assessment year 2019-20. Assessment year is the year that immediately follows the financial year.
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As per the current income tax slabs, taxation of income of resident individuals below 60 years is as follows: Income up to Rs 2.5 lakh is exempt from tax, 5 per cent tax on income between Rs 250,001 to Rs 5 lakh; 20 per cent tax on income between Rs 500,001 and Rs 10 lakh; and 30 per cent tax on income above Rs 10 lakh.
For senior citizens (aged 60 years or above but less than 80 years), income up to Rs 3 lakh is exempt from tax. Income from Rs 300,001 to Rs 5 lakh is taxed at 5 per cent, from Rs 500,001 to Rs 10 lakh at 20 per cent and above Rs 10 lakh at 30 per cent.
For super senior citizens, aged 80 years and above, income up to Rs 5 lakh is exempt from tax. Income from Rs 500,001 to Rs 10 lakh is taxed at 20 per cent and above Rs 10 lakh is taxed at 30 per cent.
After taking the deductions under Section 80 (C) to 80 (U), the tax is payable after adding the cess and surcharge, if applicable.
The education cess of 2% and secondary cess of 1% are calculated on the amount of tax payable separately. Both the cess are then added to the tax payable to arrive at the Gross tax payable amount.
The surcharge is levied @ 15% on the amount of income tax where net income exceeds Rs 1 crore and at 10 per cent where net income exceeds Rs 50 lakh and below Rs 1 crore. In the case where the surcharge is levied, the cess will be levied on the tax amount plus surcharge.
A resident individual can also avail rebate under Section 87(A) whose net income is equal to or less than Rs 3.5 lakh. The amount of rebate under this section is 100% of the income tax or Rs 2,500 whichever is less. It is deductible before calculating the cess.
