From 97.75% to 30%: How income tax slabs have changed in India since independence in 1947

It was the first change in tax slabs post independence in 1947, when the then finance minister John Mathai reduced tax on incomes up to Rs 10,000 by a quarter of an anna in two slabs. In the first slab, he reduced it from one anna to nine pies, and in the second tax slab, he reduced it from two annas to one nine pies. At that time, one anna was equal to Rs 1/16, while Rs 1 had 192 pies.

Finance minister Chavan cut the maximum marginal rate from 97.75 per cent (the highest-ever) to 75 per cent. While there was no income tax for taxpayers earning up to Rs 6,000, a 70 per cent marginal rate of basic income tax was introduced on the income slab over Rs 70,000 a year. The highest tax slab was 77 per cent.

He decreased the number of income tax slabs from eight to four. Taxpayers earning less than Rs 18,000 were kept out of tax. On Rs 18,001 to Rs 25,000, a 25 per cent income tax was fixed; for the Rs 25,001 to Rs 50,000 income group, tax was fixed at 30 per cent. On Rs 50,001 to Rs 1 lakh income, it was 40 per cent, while for income above Rs 1 lakh, it was 50 per cent, which earlier used to be 61.87 per cent.

Manmohan Singh cut down the number of tax slabs to the lowest-ever at three. For income from Rs 30, 000 to Rs 50,000, the slab was 20 per cent, for Rs 50,000 and Rs 1 lakh, the tax rate was 30 per cent, and 40 per cent was for those earning above Rs 1 lakh.

In the first tax slab of 20 per cent, the limit was increased to Rs 35,000-Rs. 60,000. The second slab of 30 per cent was kept at Rs 60,000-Rs 1.2 lakh, and the maximum tax rate of 40 per cent was kept for those with income above and over Rs 1.20 lakh.

P Chidambaram announced a 'Dream Budget', in which he kept the shifted slabs of 15, 30, and 40 per cent to 10, 20, and 30 per cent. The first slab of 10 per cent was for the Rs 40,000-Rs 60,000 income group; 20 per cent tax was for the Rs 60,000-Rs 1.50 lakh income group; and 30 per cent for income above Rs 1.50 lakh. Other than that, the standard deduction limit was increased to Rs 20,000 for all salaried taxpayers.

In the budget he presented, there was no tax for those earning up to Rs 1.60 lakh; taxpayers earning between Rs 1.60 lakh and Rs 5 lakh were to pay 10 per cent tax. On the other hand, in the range of Rs 5 lakh to Rs 8 lakh, the tax was 20 per cent. For people earning over Rs 8 lakh, the tax was 30 per cent.

In the budget, he announced that those whose earnings are up to Rs 2 lakh annually were not supposed to pay tax. There was a 10 per cent tax levied for earners in the range of Rs 2 lakh and Rs 5 lakh. Those earning between Rs 5 lakh and Rs 10 lakh would pay a tax of 20 per cent and those earning above Rs 10 lakh would be paying 30 per cent tax.

He replaced the wealth tax with a surcharge of 2 per cent on the super-rich taxpayers with a taxable income above Rs 1 crore. As a result of this, taxpayers were not required to file a wealth tax return from the Assessment Year 2016–17 onward.

This time, income between Rs 2.50 lakh and Rs 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 Rs 5 lakh) was reduced to Rs 2,500 from Rs 5,000 for people earning between Rs 2.50 lakh and Rs 3.50 lakh.

He increased the threshold limit of income tax to Rs 5 lakh from the earlier limit of Rs 2.50 lakh.

She announced that taxpayers with income below Rs 5,00,000 would remain tax-free and enjoy the tax benefits of a rebate of Rs 12,500. However, there was no change in tax slabs.

A new tax regime was introduced in the year. Taxpayers could now choose between the old and new tax regimes.

During her budget spech on July 23, 2024, finance minister Nirmala Sitharaman increased the standard deduction limit of income tax from Rs 50,000 to Rs 75,000. The increase in limit for the new tax regime taxpayers. There was no change for the old tax regime taxpayers. She also introduced new tax slabs under the new tax regime. Here, are the changes-

There is no tax up to Rs 3 lakh annual income in the new tax regime.
There will be 5% tax on income up to Rs 3 lakh-Rs 7 lakh in the new tax regime.
There will be 10% tax on income up to Rs 7 lakh-Rs 10 lakh in the new tax regime.
There will be 15% tax on income up to Rs 10 lakh-Rs 12 lakh in the new tax regime.
There will be 20% tax on income up to Rs 12 lakh-Rs 15 lakh in the new tax regime.
There will be 30% tax on income above Rs 15 lakh in the new tax regime.