To compensate for the hardships endured by the middle class during Prime Minister Narendra Modi's demonetisation drive, the Finance Minister Arun Jaitley in his budget speech on Wednesday announced a 5 per cent reduction in the existing rate of taxation for individuals with income between Rs 2.5 lakh to Rs 5 lakh from the existing 10 per cent.
While beginning the tax part of his speech, the finance minister emphasised that the direct tax collection in the country is not commensurate with income and expenditure pattern. Of 3.7 crore individuals who filed tax returns in 2015-16, 99 lakh showed income below exemption limit, the Finance minister said in his speech.
- A 5 per cent reduction in the existing rate of taxation for individuals with income between Rs 2.5 lakh to Rs 5 lakh from the existing 10 per cent.
- To offset the loss of revenue due to this exemption, the finance minister announced a surcharge of 10 per cent for taxpayers with income between Rs 50 lakh to Rs 1 crore.
- The surcharge of 15 per cent for taxpayers with income more than Rs 1 crore has also been continued.
- To bring the economy back on track and to revive the critical MSME sector, Finance Minister Arun Jaitley announced a reduction in income tax for smaller companies with an annual turnover of 50 crore by 5%
- The Finance Minister also said that the government will carry forward MAT for a period of 15 years as against 10 years now.
The Finance Minister also reduced basic customs duty on LNG from 5% to 2.5% in 2017-18. To tackle the menace of black money in funding of political parties, FM Arun Jaitley announced that Income Tax Act will be amended so that no transaction above Rs 3 lakh is be permitted in cash.
The finance minister said that the net revenue loss on the tax exemption would be at Rs 20,000 crore. Goods and Service Tax (GST), which will subsume central and state levies like excise duty, service tax and VAT, is scheduled to be rolled out from July 1. The tax slabs decided for the GST are 5, 12, 18 and 28 per cent.