# Budget 2017: Tax benefit illustration

The government has proposed to decrease the tax for those earning between 2.5 Lakh to 5 Lakh per anum to 5% from 10%. This is a welcome move and would benefit all tax slabs.  Here is an illustration.

## For those in 30% tax slab

Net taxable income after considering all applicable deductions = 15 Lakh.

OLD SLAB: Total Tax before cess = 25,000 (10% slab) + 1,00,000 (20% slab) +1,50,000 (30% slab) = 2,75,000

That is 10% of 2.5L + 20% of 5L + 30% of (amout  above 10L) = 2.75L

New SLAB:

Total Tax before cess = 12,500 (5% slab) + 1,00,000 (20% slab) +1,50,000 (30% slab) = 2,62,500

That is 5% of 2.5L + 20% of 5L + 30% of (amount  above 10L) = 2.625 L

A total saving (before cess) of Rs. 12,500

## For those in 20% tax slab

Net taxable income after considering all applicable deductions = 7 Lakh.

OLD SLAB: Total Tax before cess = 25,000 (10% slab) + 40,000 (20% slab) = 65,000

That is 10% of 2.5L + 20% of amount above 5L = 65,000

New SLAB:

Total Tax before cess = 12,000 (5% slab) + 40,000 (20% slab) = 52,500

That is 5% of 2.5L + 20% of amount above 5L = 52,500

A total saving (before cess) of Rs. 12,500

## For those in (old) 10% and new 5% tax slab

Net taxable income after considering all applicable deductions = 4 Lakh.

OLD SLAB: Total Tax before cess = 10% of income above 2.5L = 10% of 1.5L  =15,000

Section 87A can be applied for further deduction.

New SLAB:

Total Tax before cess = 5% of income above 2.5L = 5% of 1.5L  =7,500

A total saving (before cess) of Rs. 7,500 (but 50%)

Section 87A can be applied for further deduction.

Section 87 A  offers a rebate of 2500 from total tax payable before cess for those with a taxable income of Rs. 3.5L (thanks to S K Morthy for pointing this out)

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## 13 thoughts on “Budget 2017: Tax benefit illustration”

1. Rakesh says:

Thanks Pattu, that was very quick.
Savings of 12,500. Something is better than nothing.

2. Masilamani. says:

Thanks sir.Around 1500 pm is the AVG saving. For any middle class this will be useful in offsetting frequent increase in petrol and gas prices.

1. freefincal says:

Yes, I agree.

3. Kranti says:

Hi Pattu,

What about no tax upto 3 Lakhs? Is it two conflict statement in budget?

1. freefincal says:

No tax if rebate of 2500 acc to section 87a is applied

4. ravi soni says:

i think 25lac + 87a limit = no tax till 3lac

As Mr. Ravi said above, The tax calculation for this section “For those in (old) 10% and new 5% tax slab” should consider 3lakhs as the cap. (for 2017 Budget, there is no tax till 3 Lakhs).

Please update the post to avoid confusion. Thank you very much

1. freefincal says:

Yes, done thank you but this is due to section 87A and not a change in slab.

6. Bhupal says:

For Sr & Very Sr CItizen total saving (before cess) will be Rs 10,000 & NIL, not 12,500

1. freefincal says:

Yup! Thank you.

7. Amarjit says:

Isn’t there a rebate of Rs.12,500 for 20% & 30% tax slab?

1. freefincal says:

Yes, as noted in the post. If cess is included, it would be a bit more.

8. Total amount of tax for an individual (below the age of 60 years) whose taxable income is INR 300000 comes to 2500 (5% of 50000). If rebate amount of 2500 (as per section 87A of income tax) is deducted from this tax amount, we left with 0 tax.

In short an individual whose taxable income is less than or equal to 300000 won’t have to pay any tax.