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# Budget 2008 – Impact of Income Tax Slab / Bracket Changes on You

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 proposed changes to the slabs for personal income tax. Although the rate of income tax for each slab has not been changed, the increase in the limit of each slab would result in a very significant saving in the income tax for ALL taxpayers.

(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!

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