No income tax on income upto 1.6 lakhs

10% tax slab between 1.6 and 5 lakhs

20% tax slab for income of 5-8 lakhs

30% tax on income of 8 lakhs and above

New tax rates would offer relief to 60 per cent of taxpayers, the finance minister said.

In a major Rs 26,000 crore bonanza, Finance Minister Pranab Mukherjee today announced changes to tax structure giving substantial benefit to individual and corporate taxpayers.

While there would be no tax for income up to Rs 1.6 lakh, a tax of 10 per cent would be levied for income up to Rs 5 lakh, 20 per cent for up to Rs 8 lakh and 30 per cent beyond that level.

In addition, he announced that investment up to Rs 20,000 in long-term infrastructure bonds would get the exemptions of over and above the existing Rs one lakh.

As per the existing structure, there is no tax on income up to Rs 1.6 lakh, 10 per cent is levied on income up to Rs 3 lakh, 20 per cent up to Rs 5 lakh and 30 per cent thereafter.

Mukherjee also reduced surcharge on corporate tax from 10 per cent to 7.5 per cent. He had already done away with surcharge on income tax last year.

However, the Finance Minister raised minimum alternate tax (MAT) to 18 per cent from the current 15 per cent on the book profits of the companies that are not coming under the tax net because of various exemptions.

The Finance Minister said the changes in tax slabs would benefit 60 per cent of taxpayers.
Changes in personal income tax slabs would help taxpayers save 4-6 per cent of their tax outgo, experts said.
Mukherjee’s proposals sent cheers among taxpayers as they were not expecting any major changes before the implementation of the Direct Taxes Code, which is likely to come in to force from April 1, 2011.
However, the changes in slabs as proposed in draft DTC would be much steeper as it suggested 10 per cent tax on income between Rs 1.6 lakh and Rs 10 lakh, 20 per cent on up to Rs 25 lakh and 30 per cent on income beyond that.

Following is the table of new Income Tax slabs proposed by Finance Minister Pranab Mukherjee
in the Budget for 2010-11.

Income Tax Rate
(general tax payers)
Up to Rs 1,60,000 — NIL
Rs 1,60,001 to Rs 5,00,000 — 10 per cent
Rs 5,00,001 to Rs 8,00,000 — 20 per cent
Rs 8,00,000 and above — 30 per cent

(for women)
Up to Rs 1,90,000 — NIL
Rs 1,90,001 to Rs 5,00,000 — 10 per cent
Rs 5,00,001 to Rs 8,00,000 — 20 per cent
Rs 8,00,000 and above — 30 per cent

(for senior citizens of 65 years & above)
Up to Rs 2,40,000 — NIL
Rs 2,40,001 to Rs 5,00,000 — 10 per cent
Rs 5,00,001 to Rs 8,00,000 — 20 per cent
Rs 8,00,000 and above — 30 per cent

Income Tax department is also ready with two-page Saral-2 return forms for individual salaried assesses.