The financial year in India starts from 1st April every year in India. The finance minister of India presents the budget for the next fiscal year on every last day of February. The budget for the financial year 2008-2009 was accordingly presented by the finance minister of India on 29th February, 2008, applicable for the financial year 2008-2009. Each and every Indian had his eyes riveted on this budget as it was very likely that the income tax slabs would be reduced considerably, thus, helping the poor and middle class people of India. This expectation proved very right and lot of relief was offered in the income tax slabs. We would discuss this relief in details but prior to that, it is perhaps mandatory to know the past rates of the income tax and then, compare it with the new rates of the next financial year.
The earlier tax structure was nil income tax till the annual taxable income as Rs.110,000, 10% income tax between the income slab of Rs.1,10,000 and Rs.1,50,000, 20% income tax between the income slab of Rs.1,50,000 and Rs. 2,50,000, and finally, 30% income tax between the income range of Rs.2,50,000 and above. The additional education tax of 3% of the tax payable was also levied. Some selected investments like PPF, govt. mutual funds, bonds of some special types etc. were considered tax free up to Rs.1,00,000. The senior citizens above the age of 65 years were allowed tax free income up to Rs.150000. The women were offered the tax free income up to Rs.175000. This was the existing scenario of the income tax structure for the financial year 2007-2008.
The new budget presented pleasant surprise to one and all as the income tax structure was changed drastically. The new income tax slabs applicable to financial year 2008-2009 are as narrated. There will be no income tax up to the income of Rs.150000. 10% income tax shall be payable between the income slab of Rs.150000 to Rs.250000, 20% income tax payable between the income slab of Rs.250000 to Rs.500000, and, finally, 30% income tax shall be payable above the income of Rs.500000. The 3% education tax on the income tax amount is kept unchanged by the finance minister. The tax free income limit is raised to Rs.210000 for all the senior citizens above the age of 65 years. The tax free limit of the income has been raised to Rs.225000 for all the women for the upcoming year. This new structure was welcomed very warmly by one and all as it would result in to financial benefits ranging from Rs.4000 to Rs.45000 annually in various income slabs. For example, the persons having annual income of Rs.150000 would have the yearly benefit of Rs.4000. Accordingly, the persons having annual income of Rs.300000 would be benefited by Rs.19000 yearly. The persons having annual income of Rs.500000 would derive yearly benefit of Rs.39000. You can work out your own financial benefits based on these new income tax slabs. The additional education tax of 3% on the income tax payable is kept unchanged for this year also. Some selected investments like PPF, some mutual funds approved by govt., and various govt. bonds up to Rs.100000 are also considered tax free, same as per previous year. That means that if a person invests Rs.100000 in such funds, he would not be liable for any income tax payment till his annual income reaches Rs.250000.
This change is definitely considered very positive and would bring benefit to almost all the tax paying persons in India. Though, it is believed that these benefits are given due to the fourth coming elections in 2009 in India. Whatever may be the reasons, most of the people of India shall be benefited by this new tax structure and would certainly give their blessings to the present ruling government, particularly to Mr.Chindambaram, the finance minister of India.