The first slab, of income from Rs. 250,000 to Rs. 500,000 used to be taxed at 10%. Now it will be 5%.
If you make Rs. 500,000 or more (after all deductions) you will pay 5% lower tax on the first slab. That means instead of paying Rs. 25,000 (10% of the slab) you will pay Rs. 12,500.
Effectively everyone who makes more than Rs. 5 lakh a year gets Rs. 12,500 per year as an income tax benefit!
But if you make more than Rs. 50 lakh per year, be ready to pay 10% more as a surcharge on your tax. If you make more than Rs. 1 crore per year, that surcharge increases to 15% (but this last bit was there earlier too).
Apparently 96% of all companies make less than Rs. 50 cr. in turnover. And such companies will pay much lower taxes – 25% instead of the 30% they would otherwise pay.
However, there continues to be a 7% surcharge on tax for profit of Rs. 1 to 10 crores. And 12% surcharge on tax above Rs. 10 crore.
If you are an individual and you got dividends of more than Rs. 10 lakh, you would pay 10% further as dividend tax. (Otherwise, dividends are non taxable)
The budget in 2017 has introduced this tax even for LLPs. Only companies, trusts and institutions are exempt.
Many companies have promoters that are LLPs, such as Reliance Industries. This is a tax loophole that has now been fixed.
If you buy a house, you have to hold it for three years before selling, in order to claim long term capital gains. (Otherwise, it’s short-term and thus, added to your income)
Budget 2017 changes it to 2 years. This is the same as unlisted shares (where two years of holding applies for LTCG).
Most property is held longer, but this change gives investors a chance to flip property faster, if they can. It may only have a small impact.
Personal taxes are down for those with income less than Rs. 50 lakh. For them, they pay Rs. 12,500 less tax than earlier.
Long term capital gains tax changes are mostly positive for the small taxpayer, but negative for certain corporates. Dividend taxes too affects larger LLPs.
Overall, people should be pleased with the impact of personal taxes – and the Rs. 1,000+ extra per month is a small but measurable bonus. Smaller corporates too will be quite happy that 25% is the tax rate for them going forward. It’s been a good budget that way!