This year's Union Budget, which is about two weeks away, will be presented by the newly appointed Finance Minister Nirmala Sitharaman on July 5. The budget document, prepared by the ministry of finance in consultation with other ministries and experts, lists all fresh/existing estimated allocations over a period of one year.
A number of steps including pre-consultations with experts are necessary for preparing the all-encompassing financial statement for the year after taking stock of macroeconomic issues and other budgetary expenses. Not many changes are expected in the government's full budget as Piyush Goyal had already made it clear that the government remains firm on its goal of maintaining fiscal balance. However, Nirmala Sitharaman could make some exceptions, based on recently held consultations, to boost some ailing sectors that need urgent attention. Income tax rules could be further tweaked as it one of the most popular demands among taxpayers in the country.
As Nirmala Sitharaman prepares to announce the final budget, here's a look at how the tax slabs have changed over the years
1949-50: This was the first-time when tax-slab was introduced in independent India. The then finance minister, John Mathai reduced tax on income up to Rs 10,000 by a quarter of an anna, from one anna to nine pies in the first slab, and from two annas to "one nine pies" in the second slab.
1974-75: Y. B. Chavan, the next Finance minister was a success in cutting the maximum marginal rate from the highest ever 97.75 per cent to 75 per cent, which is appreciable. He did was extraordinary back then, he declared no income-tax for those earning up to Rs.6,000; a 70 per cent marginal rate of basic income-tax was kept on the income slab over Rs.70,000. The surcharge rate was reduced to a uniform level of 10 per cent for all the categories.
1985-86: During this period Vishwanath Pratap Singh was finance minister. He restructured the taxation by reducing the number of income tax slabs from eight to four. The highest marginal rate of income tax on personal incomes decreased from 61.87 per cent to 50 per cent. Those earning less than Rs 18,000 paid no tax, the rate of income tax on the slab of Rs 18,001 to Rs 25,000 was fixed at 25 per cent; on the slab of Rs 25,001 to Rs 50,000 it was 30 per cent; on Rs 50,001 to Rs1 lakh tax was 40 per cent; and on the income in excess of Rs 1 lakh it was 50 per cent.
1992-93: In this period Manmohan Singh was the finance minister. The tax structure which was framed by him has not been considerably changed till now. He was successful in reducing the tax slab to three, the lowest ever. Entry rate was 20 per cent applicable for income between Rs 30, 000 to Rs 50,000, a middle slab for incomes between Rs 50,000 and Rs 1 lakh with a tax of 30 percent, and a maximum rate of 40 per cent for those earning above Rs 1 lakh.
1994-95: Manmohan Singh again as a Finance minister adjusted the tax slabs but the rates were kept unchanged. The first slab was set at Rs 30,000 to Rs 60,000, the second slab at Rs 60,000 to Rs 1.2 lakh and the third slab at above Rs 1.2 lakh.
1997-98: During this period P Chidambaram was the finance minister and he presented what came be called as the 'Dream budget’. During his reign, the tax rates were shifted from 15, 30 and 40 per cent to 10, 20 and 30 per cent. Those in the first slab earning Rs 40,000 to Rs 60,000 paid a tax of 10 per cent, 20 per cent in the slab of Rs. 60,000 to Rs. 1.5 lakh, and 30 per cent for all income above Rs. 1.5 lakh. The limit of standard deduction was increased to Rs 20,000 which was applied uniformly to all salaried taxpayers. Later, an announcement was made that all employees drawing a salary of Rs 75,000 per annum and contributing his 10 per cent to the provident fund would not have to pay any tax.
2005-06: Still the finance minister was P Chidambaram and after 10 long years he announced some considerable changes in the tax slabs. People earning up to 1 lakh per annum would pay no tax, those earning between 1 lakh to 1.5 lakh would pay 10 percent, those earning between 1.5 lakh to 2.5 lakh would pay 20 percent and those earning above 2.5 lakh would pay 30 percent.
2010-11: Pranab Mukherjee was the finance minister during this period, he changed the income slabs. Now people earning up to 1.6 lakh per annum would pay zero tax, those earning between Rs 1.6 lakh to Rs 5 lakh paid 10 percent, those earning between Rs 5 lakh to Rs 8 lakh would pay 20 percent and those earning above Rs 8 lakh paid 30 percent.
2012-13: During this period, Pranab Mukherjee increased the exemption limit for the general category of individual taxpayers from Rs 1.8 lakh to Rs 2 lakh. Those earning up to Rs 2 lakh a year did not have to pay tax, those earning between Rs 2 lakh and Rs 5 lakh paid 10 percent, those earning Rs 5 lakh-Rs10 lakh paid a tax of 20 percent, those earning above Rs 10 lakh paid 30 percent.
2014-15: Arun Jaitley was the finance minister during this period. With the passage of Finance Bill, 2015, wealth-tax was abolished with effect from the assessment year 2016-17. He replaced the wealth tax with a surcharge of 2 per cent on the super-rich with a taxable income of above Rs 1 crore. Taxpayers, therefore, were not required to file a wealth tax return from AY 2016-17 onward.
2017-18: Arun Jaitley during this period reduced the existing rate of taxation for individual assesses with income between Rs 2.5 lakh and Rs 5 lakh to 5% from the then existing rate of 10%. The existing rebate under Section 87A of the Income-tax Act, 1961 (which was earlier given to people earning up to Rs 5 lakh) was also reduced to Rs 2,500 from Rs 5,000 for those earning between Rs 2.5 lakh and Rs 3.5 lakh. Hence, due to the combined effect of the new rebate under Section 87A and the reduction in the lowest slab to 5 percent, the tax burden for those earning up to Rs 3 lakh would be nil, and for those in the Rs 3 lakh to Rs 3.5 lakh bracket would be Rs 2,500.
2019-20: In the interim budget, finance minister Piyush Goyal did not change the income tax slabs for the financial year 2019-20 but provided relief to middle-class salaried taxpayers by rebates and increasing the standard deduction threshold. In the interim budget, Piyush Goyal increased the basic exemption limit from Rs 2 lakh to Rs 2.5 Lakh and gave tax rebate so that no tax was payable by persons having income up to Rs 3 lakh. Tax rate was also reduced from 10% to 5% for the tax slab of Rs 2.5 lakh to Rs 5 lakh and introduced Standard Deduction of Rs 40,000 for the salaried class. Deduction of savings under section 80C was increased from Rs 1 lakh to Rs 1.5 lakh. Deduction of interest for self-occupied house property was raised from Rs 1.5 lakh to Rs 2 lakh.
Expectations in 2019-20 full budget:
Nirmala Sitharaman will take centre stage to announce Union Budget 2019-20, which is one of the most detailed reports on the country's financial plan including specifics of total revenue and expenditure. And the expectations from the new finance minister have gone up as it is the first full budget after general elections.
In every Budget, the main demand of taxpayers is that the government should increase the basic exemption tax limit. But, according to tax experts, the government is unlikely to increase the basic income tax exemption limit in this year's full budget as it had already announced a provision where individuals earning up to Rs 5 lakh can get full tax rebate under Section 87A.
