Your Taxes

In the 2017-18 Budget, the Finance Minister had introduced a new income tax slab — 5 per cent for income between ₹2.5 lakh and ₹5 lakh. Earlier, the same income carried a tax of 10 per cent.

This has helped many tax payers save half the tax they were paying earlier. The amount of tax saving is ₹12,500.

Is the tax benefit of ₹12,500 uniformly available to other persons, including very senior citizens (80 years of age and above), having an income of ₹5 lakh or more.

If it is uniformly applied to higher slabs, under what section of the Income Tax Act is it to be claimed in assessment year 2018-19. In the 2017-18 Budget, the Finance Minister remained silent on the benefit to be extended to FY2018-19.

Please clarify whether the benefit of ₹12,500 may be claimed by all persons, including very senior citizens, in assessment year 2019-20.

M Ramaswamaiah

The income tax rates for individuals are defined under Part I to the First Schedule of the respective Finance Act.

In the Finance Act, 2017 (applicable for FY2017-18), the individual tax rates were modified, wherein the rate for a person of less than 60 years of age and a resident individual of 60 years or more but up to 80 years of age were reduced from 10 per cent (for FY2016-17) to 5 per cent.

This was applicable for a total income (TI) between ₹2.5 lakh (for individuals up to 60 years of age)/₹3 lakh (for resident individuals 60 years or more but up to 80 years of age) and ₹5 lakh.

That is to say, an individual below 60 years of age having a TI of ₹5 lakh would have a tax liability of ₹12,500 for FY 2017-18 vis-à-vis ₹25,000 for FY2016-17.

A very senior citizen (a resident individual who is of the age of 80 years and above) is not taxable for a TI of up to ₹5 lakh (applicable for FY 2016-17, FY 2017-18 and FY 2018-19). For TI above ₹5 lakh, the tax rate remains the same for all age groups (20 per cent up to ₹10 lakh of TI and 30 per cent above ₹10 lakh of TI for FY2017-18 and FY2018-19).

Accordingly, the benefit of ₹12,500 is not additionally available since their total income itself is not taxed up to ₹5 lakh.

Further there has been no change in the tax and progressive slab rates for very senior citizens in the Finance Acts of 2017 and 2018. Hence, the aforesaid discussion holds good for FY2018-19 as well.

Accordingly, no such separate tax benefit of ₹12,500 is available for a very senior citizen. So for very senior citizens, a TI of up to ₹5 lakh is exempt from tax; a TI of more than ₹5 lakh but up to ₹10 lakh is taxable at 20 per cent and TI above ₹10 lakh is taxable at 30 per cent.

In addition to this, if your TI of is more than ₹50 lakh, a surcharge is applicable on the income tax for FY2018-19. The surcharge is 10 per cent for TI of ₹50 lakh-1 crore and 15 per cent for TI above ₹1 crore.

A health and education cess of 4 per cent is applicable to all.

The author is a practising Chartered Accountant. Send your queries to taxtalk@thehindu.co.in

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