Imagine take-home salary of just ₹6.5 for every ₹100 you earn - How income tax slabs evolved since independence
In 1970-71, Indira Gandhi imposed a tax rate of 93.5% on incomes above ₹2 lakh. This meant that for every ₹100 earned by a person above ₹2 lakh, the tax payer could bring just ₹6.50 back home. From the tax rates of those days to 2024 - here's a look at how income tax slabs evolved since 1947
The first change in tax slabs after 1947 was by then finance minister John Mathai. He reduced tax on incomes up to <span class='webrupee'>₹</span>10,000 in two slabs. The first slab saw a reduction in the tax from one anna to nine pies, while in the second tax slab, the reduction was from two annas to one nine pies (one anna was equal to <span class='webrupee'>₹</span>1/16, while <span class='webrupee'>₹</span>1 had 192 pies).
In 1974-75, the then Finance Minister Y.B. Chavan reduced the maximum marginal tax rate from a record high of 97.75% to 75%. There was no income tax for individuals earning up to <span class='webrupee'>₹</span>6,000. However, for incomes exceeding <span class='webrupee'>₹</span>70,000 annually, a 70% marginal tax rate was introduced.
The next tax slab revision was by VP Singh in 1985-86. He reduced the number of income tax slabs from eight to four. Taxpayers earning less than <span class='webrupee'>₹</span>18,000 were exempt from tax. Those in the income range of <span class='webrupee'>₹</span>18,001 to <span class='webrupee'>₹</span>25,000 had to pay 25% tax, and for an income range between <span class='webrupee'>₹</span>25,001 to <span class='webrupee'>₹</span>50,000, the rate was set at 30%. The tax for those earning between <span class='webrupee'>₹</span>50,001 and <span class='webrupee'>₹</span>1 lakh was 40%, while income above <span class='webrupee'>₹</span>1 lakh was taxed at 50%.
Around 1992-93, Manmohan Singh reduced the number of tax slabs to three, the lowest India had ever seen. For those falling in the income range of <span class='webrupee'>₹</span>30,000 and <span class='webrupee'>₹</span>50,000, the tax rate was set at 20 %. For income between <span class='webrupee'>₹</span>50,000 and <span class='webrupee'>₹</span>1 lakh, it was 30%, and those with income above 1 lakh were taxed at 40%.
In 1994-95, Manmohan Singh once again revised the income ranges for the three tax slabs. In the first tax slab of 20 per cent, the income range was revised at <span class='webrupee'>₹</span>35,000-Rs. 60,000. The second slab of 30 per cent was kept at <span class='webrupee'>₹</span>60,000- <span class='webrupee'>₹</span>1.2 lakh, and the third slab with 40 per cent rate was kept for those with income above and over <span class='webrupee'>₹</span>1.20 lakh.
In 1997-98, came P. Chidambaram's ‘Dream Budget’. The first tax slab of 10% was applied to the income range of <span class='webrupee'>₹</span>40,000 to <span class='webrupee'>₹</span>60,000. A 20% tax was levied on the income between <span class='webrupee'>₹</span>60,000 and <span class='webrupee'>₹</span>1.50 lakh, while a 30% tax was imposed on income above <span class='webrupee'>₹</span>1.50 lakh. Additionally, the standard deduction limit was increased to <span class='webrupee'>₹</span>20,000 for all salaried taxpayers.
Pranab Mukherjee's budget, announced in 2010-2011, had no tax for those earning up to <span class='webrupee'>₹</span>1.60 lakh. Those within the income range of <span class='webrupee'>₹</span>1.60 lakh and <span class='webrupee'>₹</span>5 lakh had to pay 10 per cent tax. People earning in the range of <span class='webrupee'>₹</span>5 lakh to <span class='webrupee'>₹</span>8 lakh, had to pay 20 per cent tax. Meanwhile, for people earning over <span class='webrupee'>₹</span>8 lakh, the tax was 30 per cent.
In 2011-12 budget, Pranab Mukherjee announced that individuals earning up to <span class='webrupee'>₹</span>2 lakh annually would be exempt from paying tax. A 10% tax was levied on earnings between <span class='webrupee'>₹</span>2 lakh and <span class='webrupee'>₹</span>5 lakh. Those earning between <span class='webrupee'>₹</span>5 lakh and <span class='webrupee'>₹</span>10 lakh would pay a 20% tax, while individuals earning above <span class='webrupee'>₹</span>10 lakh were taxed at 30%.
In 2014-15, Arun Jaitley replaced the wealth tax with a 2% surcharge on super-rich taxpayers with a taxable income above <span class='webrupee'>₹</span>1 crore. As a result, taxpayers were no longer required to file a wealth tax return starting from the Assessment Year 2016–17.
In 2017-18, the income between <span class='webrupee'>₹</span>2.50 lakh and <span class='webrupee'>₹</span>5 lakh was brought under 5 per cent income tax bracket from earlier 10 per cent. The rebate under Section 87A of the Income-tax Act, 1961 (which had been given to people earning up to <span class='webrupee'>₹</span>5 lakh) was reduced to <span class='webrupee'>₹</span>2,500 from <span class='webrupee'>₹</span>5,000 for people earning between <span class='webrupee'>₹</span>2.50 lakh and <span class='webrupee'>₹</span>3.50 lakh.
In 2018-19, the then finance minister Piyush Goyal increased the threshold limit of income tax to <span class='webrupee'>₹</span>5 lakh from the earlier limit of <span class='webrupee'>₹</span>2.50 lakh.
In 2019-20, finance minister Nirmala Sitharaman announced that taxpayers with an income below <span class='webrupee'>₹</span>5,00,000 would remain tax-free and receive a rebate of <span class='webrupee'>₹</span>12,500. However, there were no changes to the tax slabs.
On July 23, 2024, Finance Minister Nirmala Sitharaman increased the standard deduction limit of income tax from <span class='webrupee'>₹</span>50,000 to <span class='webrupee'>₹</span>75,000. There were changes only in the new tax slabs in the new tax regime. The following changes have been made: No tax up to <span class='webrupee'>₹</span>3 lakh annual income in the new tax regime. 5% tax on income up to <span class='webrupee'>₹</span>3 lakh- <span class='webrupee'>₹</span>7 lakh in the new tax regime. 10% tax on income up to <span class='webrupee'>₹</span>7 lakh- <span class='webrupee'>₹</span>10 lakh in the new tax regime. 15% tax on income up to <span class='webrupee'>₹</span>10 lakh- <span class='webrupee'>₹</span>12 lakh in the new tax regime.20% tax on income up to <span class='webrupee'>₹</span>12 lakh- <span class='webrupee'>₹</span>15 lakh in the new tax regime.30% tax on income above <span class='webrupee'>₹</span>15 lakh in the new tax regime.
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Business NewsPhotosImagine take-home salary of just ₹6.5 for every ₹100 you earn - How income tax slabs evolved since independence
First Published:6 Jan 2025, 04:39 PM IST
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