This article illustrates the positive impact of the changes made in the personal income tax slabs / brackets in the Budget 2008.
| In the budget of 2008, the finance minister P. Chidambaram has |
(Ready to file your income tax return, but confused which form to use? Please read “Income Tax (IT) Return Filing – Which ITR form to use?“)
(Confused about filling the income tax return form – ITR? Want step by step guidance, and a video tutorial? Please read “How to fill Income Tax Return Form 1 (ITR1)“)
Proposed Income tax
slabs for FY 2008-09:
Rate | Income | ||
Men | Women | Senior Citizens | |
0% | Less than 1,50,000 | Less than 1,85,000 | Less than 2,25,000 |
10% | 1,50,001 to 2,50,000 | 1,85,001 to 2,50,000 | 2,25,001 to 2,50,000 |
20% | 2,50,001 to 5,00,000 | 2,50,001 to 5,00,000 | 2,50,001 to 5,00,000 |
30% | 5,00,001 and above | 5,00,001 and above | 5,00,001 and above |
Income tax slabs for
FY 2007-08:
Rate | Income | ||
Men | Women | Senior Citizens | |
0% | Less than 1,10,000 | Less than 1,45,000 | Less than 1,95,000 |
10% | 1,10,001 to 1,50,000 | 1,45,001 to 1,50,000 | NA |
20% | 1,50,001 to 2,50,000 | 1,50,001 to 2,50,000 | 1,95,001 to 2,50,000 |
30% | 2,50,001 and above | 2,50,001 and above | 2,50,001 and above |
Impact of this change
This change in slabs for personal income tax would positively
impact ALL taxpayers.
The table below illustrates the impact of this step – it has
the income tax calculated for various income levels as per the old and new
slabs. This calculation is for a male assessee who is
not a Senior Citizen, but the saving would be more or less same even for women
and Senior Citizens.
Income | Tax FY07-08 | Tax FY08-09 | Saving in Tax |
1,00,000 | 0 | 0 | 0 |
1,50,000 | 4000 | 0 | 4000 |
2,00,000 | 14000 | 5000 | 9000 |
2,50,000 | 24000 | 10000 | 14000 |
3,00,000 | 39000 | 20000 | 19000 |
3,50,000 | 54000 | 30000 | 24000 |
4,00,000 | 69000 | 40000 | 29000 |
4,50,000 | 84000 | 50000 | 34000 |
5,00,000 | 99000 | 60000 | 39000 |
More than 5,00,000 | – | – | 39000 |
Analysis
- A tax
payer at ANY income level would benefit from this change - The
benefit is relatively smaller at lower incomes, and increases as the
income increases - The
maximum benefit is for people earning Rs. 5 Lakhs per year or more – these
people would save Rs. 39,000 in income tax
Thus, the finance minister has put more money in our hands. So,
go ahead and spend it. But don’t spend it all – don’t forget to invest a decent
portion of it!
Happy investing!
Other articles you might be interested in:
- Systematic Investment Plan (SIP) – A rupee a day, keeps worries away
- Need more reasons to start saving early?
- Cost Averaging
- Start saving early and gain from Compounding – Early bird gets the worm
- Saving enough is not enough – Effect of Inflation on Savings
- Your Personal Net Worth – Importance & Calculation
- An introduction to home loans and factors to consider
- Stock Market Crash – What you should do now
- What is Endowment Plan in Life Insurance?
- Introduction to derivatives – Futures and Options
- Mutual Funds – Growth or Dividend option?
- Life after life – Why you should buy Life Insurance