There is some good news for those in the Rs 2-5 lakh tax bracket. Finance Minister P Chidambaram has left income tax slabs and rates unchanged but announced a tax credit of Rs 2,000 for those with income up to Rs 5 lakh. It means those with a tax liability of up to Rs 2,000 will not have to pay any tax.
"Assuming an inflation rate of 10% and a notional rise in the threshold exemption from Rs 2 lakh to Rs 2.2 lakh, I propose to provide a tax credit of Rs 2,000 to every person who has a total income up to Rs 5 lakh. 1.8 crore taxpayers are expected to benefit to the value of Rs 3,600 crore," Chidambaram said in his Budget speech.
In addition, he announced a tax surcharge of 10% for those with income of more than Rs 1 crore. It will apply to individuals, Hindu undivided families, firms and entities with similar tax status.
In Budget 2013-14, the government had made the tax slabs same for men and women. The basic tax exemption was raised to Rs 2 lakh. Those with taxable income above Rs 2 lakh but up to Rs 5 lakh have to pay tax at 10%. For those with taxable income of more than Rs 5 lakh but less than Rs 10 lakh, the tax rate is 20%. Income above Rs 10 lakh is taxed at 30%.
For senior citizens (60 years or above, but below 80 years) as well as very senior citizens (80 years or above), the threshold remains unchanged at Rs 2.5 lakh and Rs 5 lakh, respectively.