Each year Finance minister present Budget in Indian Parliament. The First Schedule of Finance Act has 4 parts.
Part I – It specifies rates applicable for current Assessment Year.
Part II – It specifies the rates for Tax Deductible at Source (TDS) for current Financial Year.
Part III – It specifies rates for calculating income tax for deducting tax from income chargeable under the head of “Salaries” and computation of advance tax.
Part IV – It provides for rules of computing net agricultural income.
Tax rates are different for different individuals. Below are tax rates applicable for FY 2016-17 for different individuals.
| For Individual / Hindu Undivided Family (HUF) / Association of Persons (AOP) / Body of Individuals (BOI) / Artificial Judicial Person | |
|
Nil |
| 2. Where income is between ₹ 2,50,000 – 5,00,000/- | 10% of income that exceeds ₹ 2,50,000/- |
| 3. Where total income is between ₹ 5,00,000 and ₹ 10,00,000/- | ₹ 25,000 + 20% of income between ₹ 5,00,000 – 10,00,000/- |
| 4. Where income exceeds ₹ 10,00,000/- | ₹ 1,25,000 + 30% of income that exceeds ₹ 10,00,000 |
| For Individuals who are residents and of 60 years or above, but less than 80 years | |
|
Nil |
| 2. Where income is between ₹ 3,00,000 – 5,00,000/- | 10% of income that exceeds ₹ 3,00,000/- |
| 3. Where total income is between ₹ 5,00,000 and ₹ 10,00,000/- | ₹ 20,000 + 20% of income between ₹ 5,00,000 – 10,00,000/- |
| 4. Where income exceeds ₹ 10,00,000/- | ₹ 1,20,000 + 30% of income that exceeds ₹ 10,00,000 |
| For Individuals who are residents and of 80 years or more | |
|
Nil |
| 2. Where total income is between ₹ 5,00,000 and ₹ 10,00,000/- | 20% of income between ₹ 5,00,000 – 10,00,000/- |
| 3. Where income exceeds ₹ 10,00,000/- | ₹ 1,00,000 + 30% of income that exceeds ₹ 10,00,000 |
| For Firms / LLP | |
|
30% |
| Local Authority | |
|
30% |
| Co – operative Society | |
|
10% of total income |
| 2. Where income exceeds ₹ 10,000 but not ₹ 20,000 | ₹ 1,000 + 20% of income above ₹ 10,000/- |
| 3. Where income exceeds ₹ 20,000 | ₹ 3,000 + 30% of income above ₹ 30,000/- |
| For Companies | |
|
30% of total income |
| 2. For Foreign Companies | 40% of total income |
These are tax rates only. Final Tax is subject to other conditions. Some other special Tax rates are –
- Long Term Capital Gain Tax, in general, is @ 20%. Under Section 115BB, tax rate of 30% is applicable for income from winnings-
- Any lottery;
- Crossword puzzle;
- Race including Horse race;
- Card Game and any sort of other game;
- Gambling or betting of any form
There is also surcharge on high income. The rates of Surcharge for AY 2017-18 are-
| For Individual / HUF / AOP / BOI / Artificial Judicial Person / Co – Operative Societies / Local Authorities / Firms / LLPs | |
|
12% of income tax computed by applying above rates |
| Marginal Relief is available where income exceeds ₹ 1 Crore and Surcharge is Applicable. The amount of Surcharge should not be more than income that exceeds ₹ 1 Crore. | |
| Domestic Companies | |
|
7% of income tax computed by applying above rates. |
| 2. Where income exceeds ₹ 10 Crores | 12% of income tax computed by applying above rates. |
| Marginal Relief is available. Surcharge at 7% cannot exceed the income above ₹ 1 Crore. Similarly, Surcharge at 12% cannot exceed the income above ₹ 10 Crores. | |
| Foreign Companies | |
|
2% of income tax computed by applying above rates |
| 2. Where income exceeds ₹ 10 Crores | 5% of income tax computed by applying above rates |
| Marginal Relief is available. Surcharge at 2% cannot exceed the income above ₹ 1 Crore. Similarly, Surcharge at 5% cannot exceed the income above ₹ 10 Crores. | |
To reduce the burden on small taxpayers, there is rebate under section 87A. Rebate of ₹ 5,000/- is allowed for small taxpayers whose income doesn’t exceed ₹ 5,00,000/-.
“Education Cess” @ 2% and “Secondary and Higher Education Cess” @ 1% is applicable on Taxes calculated by applying at above rates. This Cess are collected by the government to meet its commitment of providing finance to education.
An Example for calculating tax-
Illustration 1 – Mr. A who is resident in India has income of ₹ 4,50,000/- in FY 2016-17 i.e. AY 2017-18. His age is below 60 years. His Tax will be calculated as-
His Income = ₹ 4,50,000/-
Tax Slab of ₹ 2,50,000 – 5,00,000 is applicable @ 10%. Therefore, his basic tax = 10% of (4,50,000 – 2,50,000)
i.e., 20,000
Since, his income is below ₹ 5,00,000, he will get rebate of ₹ 5,000.
Therefore, his tax liability is of ₹ 20,000 – ₹ 5,000 = ₹ 15,000/-
Illustration 2 – Mr. A who is resident in India has income of ₹ 6,50,000/- in FY 2016-17 i.e. AY 2017-18. His age is below 60 years. His Tax will be calculated as-
His Income = ₹ 6,50,000/-
Tax Slab of ₹ 5,00,000 – 10,00,000 is applicable @ 25,000 + 20% for income above ₹ 5,00,000. Therefore, his basic tax = 25,000 + 20% of (6,50,000 – 5,00,000)
i.e., ₹ 55,000/-
Since, his income is above ₹ 5,00,000, he will not get rebate of ₹ 5,000. Therefore, his tax liability is of ₹ 55,000/-
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