Income Tax Slabs for 2016-17

Last Updated at: October 18, 2019
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tax slab

Just received your salary slip and are trying to figure out the basis on which tax was deducted? Well, your income is taxed according to slabs that are announced at every Union Budget. However, tax slabs haven’t changed since FY 2014-15.

[table file=”https://vakilsearch.com/advice/wp-content/uploads/2016/08/ITreg-1.csv”][/table]

Income Tax Slabs

Every citizen with an income is segregated into different income groups, or tax slabs, for the convenience of taxpayers as well as for computation by the Income Tax Department.

So it does not matter if you’re a fresher or Mukesh Ambani, the tax rate is applied uniformly. Even Mr. Ambani would not pay any tax on the first Rs. 2.5 lakh he earns in the year and pay just 10% on the next Rs. 2.5 lakh (the tax rate until Rs. 5 lakh).

The slabs do not change for anyone. The government decides a cutoff and it is subject to all of us. As indicated in the tables above, for the present fiscal year (2016-2017), the slabs are as follows:

If your earnings are lower than Rs. 2.5 lakh (Rs. 3.5 lakh for senior citizens), you pay no income tax. However, you still have to file your returns, proving that you need not pay any taxes.

However, even those earning larger sums may not have to pay any taxes, after using the deductions available to them.

Income tax is collected on a yearly basis as a percentage of an individual’s earnings in a fiscal year (April to March). The maximum rate of income tax is capped at 30% in India, though surcharge and educational cess are also applicable if you earn over Rs. 1 crore.

Click Here To E-file Your Income Tax Returns

Tax Deducted at Source

TDS or tax deducted at source is the tax that is deducted by the employer directly from your income, every month. If the amount you have paid as tax exceeds what you should have paid, you can apply for an income tax refund. Usually, however, the employer is aware of the amount you will earn in a year and what investments you will be making throughout the year, and will accordingly deduct tax.

Illustration

Amar has an income of Rs. 12 lakh per year. In April, his employer asked him about the tax-saving investments he would be making in the year. He said that he would be investing Rs. 75,000 in PPF and Rs. 75,000 in equity-linked saving schemes.

Here is how his income tax would be calculated over the year:

Income up to Rs. 2.5 lakh: Rs. 0
Over Rs. 2.5 lakh to Rs. 5 lakh: Rs. 25,000 (10% of Rs. 2.5 lakh)
Over Rs. 5 lakh to Rs. 10 lakh: Rs. 1 lakh (20% of Rs. 5 lakh)
Over Rs. 10 lakh: Rs. 16,667 (30% of Rs. 2 lakh – Rs. 1.5 lakh [investments in PPF and ELSS])
Tax Payable: Rs. 1.46 lakh
Cess (@3%): Rs. 4,300
Total Tax Payable: Rs. 1.49 lakh

Income Tax Deductions

As mentioned earlier, even those with a higher income than that decided by the government will get exemptions from the tax if they make certain investments.

According to the Income Tax Act, one can claim for tax deductions at the time of paying the Tax for the fiscal year, after showing proof that the investments have been made. The total taxable income then will be your current income for the financial year minus the investments made for which tax exemptions can be availed.

Using the income tax exemptions, deductions, and income tax rebates, one can considerably reduce the amount of income tax paid every year. However, it is essential to remember that the percentage of tax deductions available varies with the type of investment you make in that year. Tax deductions can be availed for even some everyday expenditure such has education, medical expenses, the amount invested in insurance or pension plans and donations to charitable institutions.

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    A lawyer with 14 years' experience, Vikram has worked with several well-known corporate law firms before joining Vakilsearch.