Income tax rates for 2016-17 in India

Tax Planning Calculator 470 views

No changes have been made to the existing income tax slab rates for Financial year 2016-17 in the recent Budget announced by our Honorable Finance Minister. However, there has been changes in surcharge, marginal relief and rebate of income tax. Thus, it becomes important to discuss the overall impact of the tax rates.

Following are the income tax rates for Financial Year 2016-17 (Assessment Year 2017-18):

1. Individual taxpayers:

ParticularsTax rates
Where the taxable income does not exceed INR 250,000NIL
Where the taxable income exceeds INR 250,000 but does not exceed INR 500,000 10% of the amount by which the taxable income exceeds INR 250,000
Where the taxable income exceeds INR 500,000 but does not exceed INR 10,00,000 INR 25,000 + 20% of the amount by which the taxable income exceeds INR 500,000
Where the total income exceeds INR 10,00,000INR 125,000 + 30% of the amount by which the taxable income exceeds INR 10,00,000
Surcharge of 15% of the income tax, where taxable income is more than INR 1 crore*
Education cess of 3% of the total of income tax and surcharge, if applicable

2. Senior citizens more than 60 years and less than 80 years

ParticularsTax rates
Where the taxable income does not exceed INR 300,000NIL
Where the taxable income exceeds INR 300,000 but does not exceed INR 500,00010% of the amount by which the taxable income exceeds INR 300,000
Where the taxable income exceeds INR 500,000 but does not exceed INR 10,00,000INR 20,000 + 20% of the amount by which the taxable income exceeds INR 500,000
Where the total income exceeds INR 10,00,000INR 120,000 + 30% of the amount by which the taxable income exceeds INR 10,00,000
Surcharge of 15% of the income tax, where taxable income is more than INR 1 crore*
Education cess of 3% of the total of income tax and surcharge, if applicable
Must Read  Analysis of Income from House Property (Part 3)

3 Super senior citizens above 80 years

ParticularsTax rates
Where the taxable income does not exceed INR 500,000NIL
Where the taxable income exceeds INR 500,000 but does not exceed INR 10,00,00020% of the amount by which the taxable income exceeds INR 500,000
Where the total income exceeds INR 10,00,000INR 100,000 + 30% of the amount by which the taxable income exceeds INR 10,00,000
Surcharge of 15% of the income tax, where taxable income is more than INR 1 crore*
Education cess of 3% of the total of income tax and surcharge, if applicable

However, it is important to keep in mind that the surcharge shall be subject to marginal relief.

Marginal relief
Marginal relief is given to a taxpayer who is liable to pay the surcharge.
According to the relief, in case the total income of an individual, Hindu Undivided Family (HUF), Local Authority and Firm, exceeds rupees 1 crore, then the aggregate of income tax and surcharge shall be restricted to:
(Tax on rupees 1 crore) + (Total Income – rupees 1 crore)

For instance, in case of a resident individual, age below 60 years, calculation of tax liability and marginal relief shall be as under:

The aggregate of income tax and surcharge shall be restricted to:
(Tax on 1 crore) + (Total income – 1 crore)

Amount in INR

CaseTotal IncomeIncome taxSurchargeTotal Income tax and surchargeRestricted to
I10,000,0002,825,000-2,825,000-
II10,100,0002,855,000428,2503,283,2502,925,000
III10,200,0002,885,000432,7503,317,7503,025,000
IV10,400,0002,945,000441,7503,386,7503,225,000
V1,04,20,0002,951,000442,6503,393,6503,245,000
VI10,500,0002,975,000446,2503,421,2503,325,000
VII10,700,0003,035,000455,2503,490,250No restriction
Must Read  Is Rationalization of Tax Treatment of Retirement Schemes Really Rational?

For ease of understanding, I have described the calculation of Case II below:

Total Income = INR 101,00,000

Particulars Income Tax 
On first 250,000NIL
250,000 – 500,00010% on 250,000 = 25,000
500,001 – 10,00,000 20% on 500,000 = 100,000
More than 10, 00,00030% on (101,00,000 – 10,00,000) = 27,30,000
Income Tax 28,55,000
Surcharge428,250
Total Income tax and surcharge 32,83,250
Marginal relief
Income Tax on 1 crore 28,25,000
Total Income 1 crore 100,000
Total income tax restricted to  29,25,000

Rebate on Income tax in case of certain individuals:

You can also claim a rebate of income tax under Section 87A if your total income for a financial year does not exceed rupees five lakhs. This rebate has been recently increased from rupees 3,000 to rupees 5,000.
Thus, if your total income is upto rupees 5 lakhs, you shall be entitled to a deduction from the income tax of an amount equal to 100% of such tax or rupees 5,000, whichever is less.

For instance, Mr. A, aged 50 years, earns a total income of rupees 275,000. In this case, his tax liability would be as follows:

ParticularsAmount of Income Tax (INR)
Income Tax on 275,000 as per slab rate2,500
Less- rebate2,500
Net income tax payableNIL

4. Partnership Firm

Tax rate: A Partnership Firm (including LLPs) is taxable at the rate of 30%.

Surcharge: The amount of income tax shall be increased by a surcharge at the rate of 12% of such tax, where total income exceeds one crore rupees. The surcharge will again be subject to marginal relief.

Must Read  SERIES 1- Are You Doing Enough Tax Planning?

Education cess: The amount of income tax and surcharge, if applicable would be further increased by education cess and Secondary and Higher Education cess of 3%

5. Domestic Company
Tax rate: A Domestic Company is taxable at the rate of 30%. The tax rate would be 29% if turnover or gross receipts of the company does not exceed 5 crore rupees.

Surcharge: The amount of income tax shall be increased by a surcharge at the rate of 7% of such tax, where total income exceeds one crore rupees but does not exceed 10 crore rupees. If the total income exceeds 10 crore rupees, surcharge would be levied at higher rate of 12%. The surcharge will again be subject to marginal relief.

Education cess: The amount of income tax and surcharge, if applicable would be further increased by education cess and Secondary and Higher Education cess of 3%

6. Foreign Company
Tax rate: A Foreign Company is taxable at a higher rate of 40%.

Surcharge: The amount of income tax shall be increased by a surcharge at the rate of 2% of such tax, where total income exceeds one crore rupees but does not exceed 10 crore rupees. If the total income exceeds 10 crore rupees, surcharge would be levied at higher rate of 5%. The surcharge will again be subject to marginal relief.

Education cess: The amount of income tax and surcharge, if applicable would be further increased by education cess and Secondary and Higher Education cess of 3%