Income tax exemption limit may be raised to Rs 5 lakh; know all about the current tax slabs

Amid reports that the govt may double income tax exemption limit, here's all you need to know about the current tax slabs.

NEW DELHI: In a big relief to millions of taxpayers in the country, the Narendra Modi government is reportedly mulling to double the income tax exemption threshold from the present Rs 2.5 lakh to Rs 5 lakh, for the salaried class.

Sources told Zee Media that the decision in this regard has been taken by the Finance Ministry with an aim to bring parity between taxpayers after the government's decision to implement 10 percent reservation in jobs and educational institutions for the economically backward section in the general category.

If implemented, the decision is likely to benefit millions of taxpayers, especially from the middle-class income group.

Here's how the proposed income tax exemptions will help taxpayers

Currently, income up to Rs 2.5 lakh is exempt from personal income tax. Income between Rs 2.5-5 lakh attracts 5 percent tax, while that between Rs 5-10 lakh is levied with 20 percent tax. Income above Rs 10 lakh is taxed at 30 percent. Rs 5 lakh exemption is only applicable to individuals of over 80 years.  

If the Finance Ministry implements the decision to double the income tax exemptions from the current slab of Rs 2.5 lakh to Rs 5 lakh, it will help the common man to save more. Additionally, an increase in tax limit will kickstart savings which will ultimately lead to an increase in investment and liquidity in the system.

While presenting the 2018 Union Budget, Finance Minister Arun Jaitley had announced that there will be no change in personal income tax slab for salaried employees for the current fiscal year.  

However, in some relief for the salaried class, Jaitley announced that the standard deduction of Rs 40,000 has been increased in respect of transport allowance and reimbursement of miscellaneous medical expenses.

Presenting the Union Budget 2018, the Finance Minister said, "Standard deduction shall significantly benefit the pensioners also, who normally do not enjoy any allowance on account of transport and medical expenses. The revenue cost of this decision is approximately Rs 8,000 crores. The total number of salaried employees and pensioners who will benefit from this decision is around 2.5 crores."

The Finance Minister further said, "Apart from reducing paperwork and compliance, this will help middle-class employees even more in terms of reduction in their tax liability."

In the 2017 Budget, Jaitley had proposed to reduce the existing rate of taxation of those with income between Rs 2.5 lakh to Rs 5 lakh from 10 percent to 5 percent.

Current Income Tax Slabs

Before you file for your ITR, you must know your tax bracket. Check out the following:

Individual Taxpayers

-Up to Rs 2,50,000: NIL

-Rs 2,50,001 to Rs 5,00,000: 5% Rs 7,725 (Savings)

Senior Citizens 60 years but less than 80 years

-Up to Rs 3,00,000: NIL

-Rs 3,00,001 to Rs 5,00,000: 5% Rs 2,575 (Savings)

-Rs 5,00,001 to Rs 10,00,000: 20% Rs 7,725 (Savings)

Senior Citizens 80 years and above

-Up to Rs 5,00,000: NIL

-Rs 5,00,001 to Rs 10,00,000: 20% Rs 7,725 (Savings)

Surcharge of 10% on income of all individuals above Rs 50 lakh and less than Rs 1 crore and surcharge of 15 percent on income above Rs 1 crore.