Income Tax Comparison

Income Tax Comparison AY 2017-2018 and AY 2018-2019

Have you computed how much income tax you need to pay this year? Are you on the right track in terms of income tax planning? 

Tax planning is an important part of a financial plan. Whether you are a salaried individual, a professional or a businessman, you can save taxes to certain extent through proper tax planning. Read the following blog to learn about the Income Tax Comparison for Assessment Year 2017-2018 and 2018-2019.

There are two types of taxes in India – direct and indirect. A direct tax is a tax you pay on your income directly to the government. Indirect tax is a tax that restaurants, theatres and e-commerce websites charge you on for goods or a service.

Everyone who earns or gets an income in India is subject to income tax. For simpler classification, the Income Tax Department breaks down income into five heads:

 Head of Income

 Nature of Income covered

 Income from Salary Income from salary and pension are covered under here
 Income from Other Sources Income from savings bank account interest, fixed deposits
 Income from House Property This is rental income mostly
 Income from Capital Gains Income from sale of a capital asset such as mutual  funds, shares, house property
 Income from Business and Profession This is when you are self-employed, work as a  freelancer or contractor, or you run a business. Life  insurance agents, chartered accountants, doctors and  lawyers who have their own practice, tuition teachers,  etc.

Income Tax:

  • To bring more people into the tax net, income between Rs 2.5 lakh and Rs 5 lakh to be taxed at 5 % instead of the current 10% rate.
  • Additional charge of 10% for individuals with income in the Rs.50 lakhs-Rs. 1 crore range.
  • 15% surcharges on income above 1 crore to continue.

 

Income Tax Slab for Individual Tax Payers

 

FY 2017-18(AY 2018-19)

FY 2016-17(AY 2017-18)

IncomeSlabTax RateTax Rate
0 – 2.5 lakhNo taxNo tax
2.5 – 5 lakh5%10%
5 – 10 lakh20%20%
More than 10 lakh30%30%
Surcharge
  • 10% of incometax, where total income exceeds Rs.50 lakh up to Rs.1 crore.
  • 15% of income tax, where the total income exceeds Rs.1 crore.
15% of income tax, where total income exceeds Rs.1 crore.

 

Income Tax Slab for Senior Citizens

 

FY 2017-18(AY 2018-19)

FY 2016-17(AY 2017-18)

Income SlabTax RateTax Rate
0 – 3 lakhNo taxNo tax
3 – 5 lakh5%10%
5 – 10 lakh20%20%
More than 10 lakh30%30%
Surcharge
  • 10% of income tax, where total income exceeds Rs.50 lakh upto Rs.1 crore.
  • 15% of income tax, where the total income exceeds Rs.1 crore.
15% of income tax, where total income exceeds Rs.1 crore.

 

Income Tax Slab for Super Senior Citizens

 

FY 2017-18(AY 2018-19)

FY 2016-17(AY 2017-18)

Income SlabTax RateTax Rate
0 – 2.5 lakhNo taxNo tax
2.5 – 5 lakhNo taxNo tax
5 – 10 lakh20%20%
More than 10 lakh30%30%
Surcharge15% of income tax, where total income exceeds Rs.1 crore.15% of income tax, where total income exceeds Rs.1 crore.

 

How to Calculate Income Tax from Income Tax Slab Rates?

Suppose Ms. Merry has an annual income of Rs. 10 lakh in the Financial Year 2016-17. How will we calculate her taxliability for Assessment Year 2017-18?

Income(in rupees)TaxRate (in %age)CalculationTaxRate (in %age)Calculation
0 – 2.5 lakhNil2,50,000 x 0 = 0Nil2,50,000 x 0 = 0
2.5 – 5 lakh10%2,50,000 x 10% = 25,0005%(new rate)2,50,000 x 5% = 12,500
5 – 10 lakh20%5,00,000 x 20% = 1,00,00020%5,00,000 x 20% = 1,00,000
Above 10 lakh30%0 x 30% = 030%0 x 30% = 0
 Total tax = (0 + 25,000 + 1,00,000 + 0) x 1.03 = Rs. 1,28,750 Total tax = (0 + 12,500 + 1,00,000 + 0) x 1.03 = Rs. 1,15,875

 

So, her tax liability for Financial Year 2016-17 comes out to be Rs. 1,28,750.

Now suppose that she earns the same amount of income in the Financial Year 2017-18. How will we calculate her taxliability for Assessment Year 2018-19?

Note: This tax calculation is a basic example for your understanding which is applicable only for individuals (up to 60 years of age) without accounting for tax deductions and exemptions.So, her tax liability for Financial Year 2017-18 comes out to be Rs. 1,15,875. Her tax liability has effectively reduced in F.Y. 2017-18 for the same amount of income earned during F.Y. 2016-17 due to reduction in tax slab rate for income falling between Rs. 2,50,000 to Rs. 5,00,000.

Rebate under Sec.87A

  • An individual whose total income does not exceed Rs. 3,50,000 and who is resident Indian is entitled to claim rebate under section 87A.
  • Also, do remember that this rebate is not available for super senior citizens.
  • Earlier the rebate was Rs.5,000 for those whose income is up to Rs.5,00,000.
  • However, from FY 2017-18 it is now reduced to Rs.2,500 and income range to Rs.3,50,000.

Changes in National Pension Scheme from Budget 2017

  • Under Section 80C, investments in the NPS of up to Rs 1.5 lakh are eligible for tax benefits. 
  • If the taxpayer contributes more than Rs 1.5 lakh to the NPS in a year, the amount in excess of Rs 1.5 lakh can be claimed as a deduction under the new Section 80CCD(1b) up to a limit of Rs 50,000. 
  • Over and above the ceiling limit of Rs 1.5 lakh provided under Section 80C and limit of Rs 50,000 under Section 80CCD(1B), contribution from the employer up to 10 per cent of basic salary + Dearness Allowance (DA) is also eligible for deduction under Section 80CCD(2). 

Home Loan 

  • Home owners can claim deduction of up to Rs.2 lakhs on their home loan interest if the owner or his family reside in the house property.
  • The same treatment applies when the house is vacant.
  • If you have rented out the property, the entire interest on the home loan is allowed as a deduction.
  • Your deduction on interest is limited to Rs.30,000 if you fail to meet any of the conditions given below for the Rs.2 lakh rebate.
  • The deduction to claim principal repayment is available for up to Rs. 1,50,000 within the overall limit of Section 80C.
  • Section 80EE, changed to the Income Tax Act, provides first-time homeowners tax benefit of up to Rs.50,000 per financial year.

You can’t transact more than Rs.3,00,000 in cash

  • To promote the digital economy and also to curb black money, Government decided to bring in the new law where you are not allowed to transact above Rs.3 lakh in cash.
  • For this purpose, a new IT Section was introduced. This is Section 269ST.
  • The highlights of IT Section 269ST are as below.
  • This Rs.3,00,000 limit is per person and per day.
  • Also, this is related to single transaction.
  • Provisions of this section will not apply to in case of receipt of money by Government, any banking company, post office savings bank or co-operative bank.

One-page Income Tax Return Form

  • Government will introduce the one-page income tax return form which can be used by those whose income is less than Rs.5 lakh and also they must have other than business income.
  • Also a person of this category who files income tax return for the first time would not be subjected to any scrutiny in the first year unless there is specific information available with the Department regarding his high-value transaction.

factoHR is one such HR and Payroll software where you can download the Income Tax report of an employee. You can also download IT statement for an employee which is automatically generated where you can view the detail report on deductions as well as exemptions. Income tax liability report of an employee can also be viewed. You can download various forms such as form 24Q, form 16B and form 16.

To know more about factoHR – HR & Payroll software, please contact +91 782 000 3100 or visit www.factohr.com.

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Aniruddha Nagodara

Aniruddh Nagodara is the CEO at Version Systems Pvt Ltd. He develops a world class organization with focus in HR & Retirement Benefits. He is leader in the organization for company's Business Development, Partnership, HR and Finance function. He is also instrumental for implementing best HR practices in organization to make Version Systems a Great place to work.