Budget is a document of expectations and hope for an Economy. It shows the intent and direction that the policy makers has decided for the economy of the nation. The people of the nation with every budget has lots of expectation especially relating to slab rates. From Highest income tax rate of 97.75% for individuals to 30% let’s look at the brief history of Slab rates in India.
1. 1949- 1950
The first time Tax slab were adjusted in independent India by Mr. Shanmukham Chetty, the Finance Minister of India. Highest slab being Rs. 15001 and above and tax was payable Five annas in rupee. An anna was a currency unit formerly used in India and Pakistan, and it is equal to 1/16 a rupee. It was divided into 4 paisa or 12 pies, thus there were 64 paise in a rupee and 192 pies. There was no surcharge applicable.
2. 1974- 1975
Y. B. Chavan cut the maximum marginal rate from 97.75% to 75%. Taxes were lowered at all levels of personal incomes. Here is what he did: No income-tax for those earning up to Rs.6,000; marginal rate of basic income-tax was kept at 70% on the income slab over Rs.70,000. The rate of surcharge was reduced to a uniform level of 10% for all categories. The combined incidence of income-tax and surcharge would amount to 77% of the taxable income in the highest slab.
3.1985-86
VP singh revamped Indian personal tax system by reducing number of slabs from 8 to 4.
Highest tax rate was decreased from 61.875% to 50%.
Slab rate was as follow-
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%; on the slab of Rs 25,001 to Rs 50,000 it was 30%; on Rs 50,001 to Rs 1 lakh tax was 40%; and on the income in excess of Rs 1 lakh it was 50%.
4.1992-93
Slab rates as we know today were intoeduced by the Finance minister Dr. Manmohan singh.
The slabs were reduced to just three and maximum tax rate was 40%.
Earnings between Rs.30000 to Rs.50000 were taxed at 20% and earning between Rs.50000 to Rs.100000 were taxed at 30%.
And earnings above were taxed at Rs.100000.
5. 1994- 1995
Slab rates were adjusted and the first slab was set at Rs 35,000 to Rs. 60,000, with the same rate of 20% tax, second slab was set as Rs 60,000 to Rs 1.2 lakh with the same rate of 30% tax , and maximum tax rate of 40% was set for income over Rs 1.2 lakh.
6. 1997-98
The budget was called “dream budget” and both tax rate and slab rates were changed Those in the first slab earning Rs 40,000 to Rs 60,000 paid a tax of 10% , 20% in the slab of Rs. 60,000 to Rs. 1.5 lakh, and 30% for all income above Rs. 1.5 lakh. He also increased the limit of standard deduction to Rs. 20,000, which would apply uniformly to all salaried taxpayers. Further, it was announced that all employees drawing a salary of Rs 75,000 per annum and contributing 10% to the provident fund would have to pay no tax at all.
7.2005-06
After the gap of almost the decade the tax rates were again adjusted with those earning up to Rs 1 lakh would pay no tax, those earning Rs 1 lakh to Rs 1.5 lakh were taxed at 10% , Rs1.5 lakh to Rs2.5 lakh were to be taxed at 20% , and those earning over Rs2.5 lakh were to pay 30% as tax.
8. 2010-11
After a wait of half a decade slabs rates were again adjusted withthose earning up to Rs 1.6 lakh would pay zero tax, those in the income bracket of Rs 1.6 lakh to Rs 5 lakh would pay 10% , those in the bracket Rs 5 lakh to Rs 8 lakh would pay 20% , and anyone earning more than Rs 8 lakh would pay 30%.
9.2012-13
Pranab mukherjee announced that 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 would now pay 10%, those earning Rs 5 lakh-Rs10 lakh would pay a tax of 20%, those earning above Rs 10 lakh would pay 30%.
10.2014-15
Arun jaitely through finance bill 2015 abolished wealth tax and introduced surchage of 2% payable by super rich on income above Rs.1 crore.
11. 2017-18
Jaitley reduced the existing rate of taxation for individual assesses with income between Rs 2.5 lakh and Rs 5 lakh to 5% from the present rate of 10%. Added to this, 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.
12. 2020-2021
Finance minister Nirmala sitharaman introduced a new tax regime with tax payer having option between old and new regime.
(Author Aman Garg is a CA FINAL student with group 2 cleared.)
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