With the first advance tax date gone, income tax payers would have to begin again the task of planning their income for the financial year 2008-2009 so that they can pay the requisite amount of remaining two advance tax installment due on 15 December 2008 and 15 March 2009.

For those individuals, who have similar earnings in FY 2007-08 and 2008-09, the amount of income tax is reduced significantly which is a pleasant initiative leading to better tax compliance.

In the following illustration, we have considered 3 base scenarios for calculating income tax for 3 types of individual assessee – women, senior citizen and others. Income tax calculated includes education cess (3%) and surcharge (10%) for income over Rs. 10 lac.

If income is Rs.3,00,000

Under new income tax slab, income tax payable by senior citizen, women and others are Rs.7725, Rs.12360 and Rs.15450 respectively. While under old slab, the amount was Rs.26780, Rs.36565 and Rs.40170 respectively. This translates into maximum saving of Rs.24720.

If income is Rs.5,00,000

Under new income tax slab, income tax payable by senior citizen, women and others are Rs.48925, Rs.53560 and Rs.56650 respectively. While under old slab, the amount was Rs.88580, Rs.98365 and Rs.101970 respectively. This translates into maximum saving of Rs.45320.

If income is Rs.10,00,000

Under new income tax slab, income tax payable by senior citizen, women and others are Rs.223678, Rs.228866 and Rs.232265 respectively. While under old slab, the amount was Rs.267388, Rs.278152 and Rs.282117 respectively. This translates into maximum saving of Rs.49852.

What does this imply?

Under the new income tax slabs, an individual can save maximum of Rs.49852 per year for income of Rs.10 lacs which also means a 21% savings in income tax payable.

Secondly, an individual can earn Rs.5,00,000 and pay just Rs.56650 in taxes and if one also invests Rs.1 lac under section80C, then the same tax would be payable be payable for income of Rs. 6 lacs, which would mean the tax percentage is just 9.44%. Such low taxes should ensure more people to come under the tax purview.

For reference, the current income tax slabs are as under:
Up to 1,50,000                                                                                                                                 NIL
Up to 1,80,000 (for women)                                                                                         NIL
Up to 2,25,000 (for resident individual of 65 years or above)         NIL
1,50,001 – 3,00,000                                                                                                               10%
3,00,001 – 5,00,000                                                                                                               20%
5,000,001 upwards                                                                                                                 30%
Add: Education cess (3%) and Surcharge (above 10lacs @10%)