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Another Budget has gone by and the government has put little more money in the hands of tax payers. This year too, those in the higher tax bracket have better tax savings. Individual tax payers in the lower tax bracket would save Rs 2,060 of tax for FY13 while those in the higher tax bracket can save up to Rs 22,600.
Subsequent changes in tax slabs have resulted in the take-home pay across tax brackets increasing between 2007-08 and 2012-13. This increase ranged between 11 and 18 per cent for various tax slabs. Those in the higher tax slabs benefited more.
For an employee with Rs 3 lakh salary per annum, the take-home salary after tax was Rs 2.59 lakh in the year ended March 2008. This fiscal, the post-tax salary for the same Rs 3 lakh would be Rs 2.89 lakh. We have not taken into account investments in tax savings instruments (Section 80 C) and the impact of inflation.
Raising tax slabs
The Government's bid to increase the taxable income level has greatly helped those in the Rs 2.5 to Rs 5 lakh income level. Tax rate for this segment was 30 per cent in 2007-08. An employee earning the same amount will be taxed just 10 per cent now. Raising slabs resulted in an employee earning Rs 3 lakh, retaining 96.5 per cent of the salary as against 86.6 per cent in 2007-08.
The tax savings on Rs 12 lakh salary was Rs 1.54 lakh in the six years period ended March 2013. For this individual, the cumulative tax outgo has fallen from 29.2 per cent to 17.2 per cent of his salary.
Personal tax inflows
Assuming your salary grew from Rs 6 lakh in 2007-08 to Rs 9 lakh in 2012-13, the post-tax rise in salary would have been Rs 3.2 lakh; Rs 20,000 greater than Rs 3 lakh rise in your salary pre-tax. This is because of the higher tax rate for this income five years ago. Even as the government liberalised tax slabs, the personal income tax inflows for the government have grown by 13 per cent compounded annually during 2007-08 and 2011-12. Expanding work force and rising income levels have made up for the reduced tax revenue. Next year, the government has budgeted 14 per cent higher tax inflows from personal tax.
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