The salaried people with annual taxable income of less than Rs400,000 but more than Rs350,000 will pay income tax at the proposed rate of 10 per cent instead of the present 1.50 per cent. Monthly salary of Rs33,000 falls in this category.
The tax burden will increase by more than four times for the salaried people whose annual taxable income is more than Rs400,000 but less than Rs450,000. They will pay taxes at the proposed rate of 10 per cent instead of the current 2.50 per cent. People getting a maximum monthly salary of Rs38,000 fall in this bracket.
Currently, there are seven tax slabs for the assessment of income — minimum tax bracket at 1.50 per cent and maximum at nine per cent.
These slabs apply to minimum annual income of Rs350,000 and maximum of Rs1,050,000. The number of salaried people falling in this category stands at 316,000 — 80 per cent of the total taxpayers registered with the income tax department.
This means that changes in the income tax slabs will severely hit the low-income people who are already facing the brunt of inflation. It has been proposed to reduce the number of existing seven slabs to one. The seven slabs were worked out with the principle of reducing the taxation impact on the low-income salaried people.
Further analysis of the proposals shows that the tax burden impact will be three times greater for those people whose annual taxable income is less than Rs550,000 but more than Rs450,000, and more than two times for people whose income exceeds Rs550,000 but remains less than Rs650,000. The existing tax slabs for these brackets are 3.50 per cent and 4.50 per cent, respectively.
Other tax slabs proposed to be abolished are six per cent, 7.50 per cent and nine per cent on taxable income exceeding Rs650,000 but less than Rs1,050,000 per annum. A rate of 10 per cent has been proposed for these slabs.
At the same time, the government has decided to reduce the number of tax slabs for the salaried class from 16 to only six. However, it has also been proposed to increase the rate of income tax for the upper salaried people from 20 per cent to 35 per cent. Three new tax rates — 25 per cent, 30 per cent and 35 per cent — have been proposed for them.
The government is also considering introducing a new tax slab of 15 per cent on the taxable income exceeding Rs1 million but remaining less than Rs2 million. The slab will be 20 per cent for people whose annual taxable income is between Rs2 million and Rs3 million.
A new rate of 25 per cent has been proposed those people whose taxable income exceeds Rs3 million but remains less than Rs5 million. Those taxpayers whose income stands between Rs5 million and Rs10 million will now be paying income tax at 30 per cent from next year. A tax rate of 35 per cent will apply to people whose taxable income exceeds Rs10 million.
For individual taxpayers, the government has proposed a new tax slab of 15 per cent on annual taxable income between Rs350,000 and Rs500,000; 20 per cent on income between Rs500,000 and Rs750,000; 25 per cent on income between Rs750,000 and Rs1 million; 30 per cent on income between Rs1 million and Rs10 million; and 35 per cent on income of more than Rs10 million.
Almost all these slabs will apply to the association of persons.