I-T rate for entry-level slab halved to 5%

Those earning between Rs 2.5 lakh and Rs 5 lakh a year will pay 5%, instead of the current 10%, as income tax. Readjusting rebates, Finance Minister Arun Jaitley said on Wednesday people earning up to Rs 3 lakh a year would have zero tax liability. Those with incomes between Rs 3 lakh and Rs 3.5 lakh will pay Rs 2,500.

Tax payers in the Rs 5 lakh-plus bracket get a maximum benefit of Rs 12,500, Jaitley said, presenting his Budget in Parliament on Wednesday. He also proposed a surcharge of 10% on incomes between Rs 50 lakh and Rs 1 crore. He expects this to bring in Rs 2,700 crore in additional revenue. The existing 15% surcharge on incomes of more than Rs 1 crore will continue.

Jaitley proposes no change in the other two income tax slabs. The finance minister said many more people would come under the tax net if the rates were low.  He appealed to citizens in the lowest slab (Rs 2.5 lakh to Rs 5 lakh) to contribute to nation-building by paying 5% as tax.

The minister said the direct tax exemptions would result in revenue loss of Rs 22,700 crore. But with the additional revenue of Rs 2,700 crore factored in, the net loss would come down to Rs 20,000 crore, he said.