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Budget 2012: New Tax Slabs


I’m writing a lot on the budget, but I thought I’d do a quick post since most questions are in this domain.

The tax slabs have been reorganized to align with what was proposed in the Direct Tax Code.

– No tax till 200,000 (from 180,000)
– 10% from 200,000 to 500,000
– 20% from 500,000 to 10,00,000
– 30% above 10,00,000

The differential exemption limit for women (lower limit was 190,000 at the first slab) has been removed. People above the age of 60 will start paying tax only at 250,000.

If you’re earning more than Rs. 10 lakh, the extra money you get to keep is about Rs. 22,000 a year; to anyone earning less than Rs. 8 lakh the changed slabs only give you an extra Rs. 2,000.

Overall the service tax and excise duty changes will hurt a lot more. Service tax now applies on everything, save 17 items, and is up from 10% to 12%. Excise duty on nearly everything is up 2%. Gold’s duty has been doubled to 4%.

One note though: If you save Rs. 22,000 when you make more than Rs. 10 lakhs, the saving you have is about Rs. 2,000 per month. If you spend less than, say, Rs. 90,000 a month, the increase in service tax/excise will leave you “tax neutral”. (plus, service tax not applicable on house rent).

On the plus side, upto Rs. 10,000 of savings bank interest is not subject to tax.


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