In a relief to individual tax payers, the government on Friday changed the slabs cutting the rate to 10 percent for income up to Rs five lakh, while leaving the threshold limit for tax-free income unchanged at Rs 1.6 lakh.
Income between Rs five lakh to Rs eight lakh will attract 20 percent tax against the current slab of Rs three lakh to Rs five lakh. Hitherto, the income between Rs 1.6 lakh and Rs three lakh was taxed at the rate of 10 percent.
In case of income over Rs eight lakh, tax would be levied at a rate of 30 percent — which was hitherto applicable on income above Rs five lakh.
The tax concessions would put more money in the hands of consumers.
Finance Minister Pranab Mukherjee also extended income tax exemption to investment in infrastructure bonds by up to Rs 20,000 over and above the existing limit of Rs one lakh.
In a major relief to the corporate sector, the government proposed to reduce the surcharge on corporate tax to 7.5 percent from 10 percent now.
However, it has increased the Minimum Alternate Tax (MAT) from existing 15 percent to 18 percent on book profits of those companies which do not pay tax because of various exemptions.