Income Tax is a topic very often found to be a part of conversations of all salaried personnel’s. Over the last 70 years, India and its taxpayers have come a long way from 97.75 percent being the highest income tax rate to 30 percent and from 11 tax slabs to 3.
With the budget due to be presented on the 1st of February by the Finance Minister, Arun Jaitley a lot of the above-mentioned conversations will also be centered on what the presenting of the Budget would mean to income tax rates for the Financial Year 2018. Though every year, prior to the Budget being presented the expectations run high, not a lot of change comes along with every new budget where a lot of them have actually been nonevents. It has been quite some time since any major changes were seen in the tax structure – the last one being in year 1997 by then Finance Minister, P. Chidambaram dubbed as the “Dream Budget”
Below is how the Income-tax structure has evolved over the years-
1949-50: The first time Tax slabs were tinkered in independent India. Tax on incomes up to 10,ooo Rs was reduced by a quarter of an anna, from one anna to nine pies in the first slab and from two annas to one nine pies in the second slab.
1974-75: The maximum marginal rate was cut from 97.75 percent to 75 percent. taxes were lowered at all levels of personal incomes.
1985-86: The number of tax slabs were reduced from 8 to 4 and the highest marginal rate of income tax on personal incomes decreased from 61.87 percent to 50 percent. Those earning less than 18,000 paid no tax, those earning between 18,ooo to 25,000 paid 25 percent, those earning between 25,000 to 50,000 paid 30 percent, those earning between 50,000 to 1 lakh paid 40percent and those earning above one lakh paid 50 percent.
1992-93: The tax slab was reduced to 3, where 20 percent was paid by persons earning between Rs 30,000 to 50,000, 30 percent was paid by persons earning between Rs 50,000 to Rs 1 lakh and maximum 40 percent was paid by persons earning above Rs 1 lakh.
1994-95: Tax slabs were adjusted but the tax rates remained unchanged. The first slab was set at 30,000 to 60,000, the second slab at 60,000 to 1.2 lakh and the third slab at above 1.2 lakh.
1997-98: The prevailing rates of 15, 30 and 40 percent were replaced by 10, 20 and 30 percent. Limit of standard deduction was also increased Rs 20,000 to apply uniformly on all salaried taxpayers. Employees drawing a salary of Rs 75,000 per annum and contributing 10 percent to provident fund did not have to pay any tax at all.
2005-06: There were some considerable changes in the tax brackets. People earning upto 1 lakh per annum would pay no tax, those earning between 1 lakh to 1.5 lakh would pay 10 percent, those earning between 1.5 lakh to 2.5 lakh would pay 20 percent and those earning above 2.5 lakh would pay 30 percent.
2010-11: Income tax slabs were changed. Now people earning up to 1.6 lakh per annum would pay zero tax, those earning between Rs 1.6 lakh to Rs 5 lakh paid 10 percent, those earning between Rs 5 lakh to Rs 8 lakh would pay 20 percent and those earning above Rs 8 lakh paid 30 percent
2012-13: Exemption limit for the general category of individual taxpayers has raised from Rs 1.8 lakh to Rs 2 lakh, and the tax slabs were changed slightly. Those earning up to Rs 2 lakh a year did not have to pay tax, those earning between Rs 2 lakh and Rs 5 lakh paid 10 percent, those earning Rs 5 lakh-Rs10 lakh paid a tax of 20 percent, those earning above Rs 10 lakh paid 30 percent.
2014-15: With the passage of Finance Bill, 2015, wealth-tax was abolished with effect from the assessment year 2016-17. The wealth tax was replaced with a surcharge of 2 percent on the super-rich with a taxable income of above Rs 1 crore. Taxpayers, therefore, were not required to file a wealth tax return from Assessment Year 2016-17 onward.
2017-18: The existing rate of taxation for individual assesses was reduced, with income between Rs 2.5 lakh and Rs 5 lakh to 5% from the present rate of 10%. The existing rebate under Section 87A of the Income-tax Act, 1961 (which was earlier given to people earning up to Rs 5 lakh) was also reduced to Rs 2,500 from Rs 5,000 for those earning between Rs 2.5 lakh and Rs 3.5 lakh. Hence, due to the combined effect of the new rebate under Section 87A and the reduction in the lowest slab to 5 percent, the tax burden for those earning up to Rs 3 lakh would be nil, and for those in the Rs 3 lakh to Rs 3.5 lakh bracket would be Rs 2,500.