Income Tax Slab Rates FY 2016-17 (AY 2017-18)
Last updated: 3 June 2026
For Financial Year 2016-17 (Assessment Year 2017-18), the basic slab structure remained unchanged from the previous year — 10%, 20%, 30% on income above ₹2.5 lakh. The headline Budget 2016 change was increasing the Section 87A rebate to ₹5,000 (from ₹2,000), making the effective tax-free limit ₹5 lakh for eligible individuals. A 3% education cess and 15% surcharge (income > ₹1 crore) apply on top.
87A = ₹5,000
Budget 2016 raised the Section 87A rebate to ₹5,000 for individuals with total income up to ₹5,00,000 — the highest it has been under this section before the new-regime restructuring.
Individual — Below 60 Years (FY 2016-17)
| Income Slab | Tax Rate | Effective Tax |
|---|---|---|
| Up to ₹2,50,000 | Nil | ₹0 |
| ₹2,50,001 – ₹5,00,000 | 10% | Up to ₹25,000 (less 87A rebate) |
| ₹5,00,001 – ₹10,00,000 | 20% | ₹25,000 + 20% of amount above ₹5L |
| Above ₹10,00,000 | 30% | ₹1,25,000 + 30% of amount above ₹10L |
Add: Education Cess 2% + Secondary & Higher Education Cess 1% = 3% cess on tax payable (after 87A rebate).
Senior Citizens (Age 60–79) — FY 2016-17
| Income Slab | Tax Rate |
|---|---|
| Up to ₹3,00,000 | Nil |
| ₹3,00,001 – ₹5,00,000 | 10% |
| ₹5,00,001 – ₹10,00,000 | 20% |
| Above ₹10,00,000 | 30% |
Super Senior Citizens (Age 80+) — FY 2016-17
| Income Slab | Tax Rate |
|---|---|
| Up to ₹5,00,000 | Nil |
| ₹5,00,001 – ₹10,00,000 | 20% |
| Above ₹10,00,000 | 30% |
Section 87A Rebate — FY 2016-17
Resident individuals with total income up to ₹5,00,000 were entitled to a rebate under Section 87A of up to ₹5,000 (or the actual tax, whichever is lower). This effectively made income up to ₹5 lakh tax-free for those who qualified. Note: this rebate applies before the 3% cess calculation.
Surcharge — FY 2016-17
| Income Level | Surcharge Rate |
|---|---|
| Up to ₹1,00,00,000 | Nil |
| Above ₹1,00,00,000 | 15% of income tax |
Marginal relief applies so that the extra tax due to surcharge does not exceed the income in excess of ₹1 crore.
Budget 2016 Key Changes
| Change | Detail |
|---|---|
| Section 87A rebate | Raised from ₹2,000 to ₹5,000 for income ≤ ₹5 lakh |
| New manufacturing companies | 25% tax rate for companies incorporated after 1 March 2016 (no specified deductions) |
| Small domestic companies | 29% tax rate where turnover ≤ ₹5 crore (FY 2014-15 turnover base) |
| Transport allowance exemption | Raised to ₹1,600/month (₹19,200/year) from ₹800/month |
| Section 269ST (proposed) | Cash receipts ≥ ₹2 lakh from single person to be restricted (effective FY 2017-18) |
| Dividend Distribution Tax | Additional 10% tax on dividend income > ₹10 lakh in hands of individuals (Section 115BBDA) |
Exemptions and Deductions Available in FY 2016-17
| Item | Limit / Amount |
|---|---|
| Section 80C (EPF, PPF, LIC, ELSS, etc.) | Up to ₹1,50,000 |
| Section 80CCD(1B) — NPS additional | Up to ₹50,000 |
| Section 80D — Health insurance premium | ₹25,000 (₹30,000 for senior citizens) |
| Transport allowance exemption | ₹19,200/year (₹1,600/month) |
| Medical reimbursement | ₹15,000/year (bills required) |
| HRA exemption | Least of: actual HRA, 50%/40% of basic, rent minus 10% basic |
| Standard deduction | Not applicable (introduced FY 2018-19) |
Historical Slab Comparison: FY 2015-16 to FY 2017-18
| Feature | FY 2015-16 | FY 2016-17 | FY 2017-18 |
|---|---|---|---|
| Basic exemption (individual) | ₹2,50,000 | ₹2,50,000 | ₹2,50,000 |
| Senior citizen exemption | ₹3,00,000 | ₹3,00,000 | ₹3,00,000 |
| Super senior exemption | ₹5,00,000 | ₹5,00,000 | ₹5,00,000 |
| Section 87A rebate | ₹2,000 (income ≤ ₹5L) | ₹5,000 (income ≤ ₹5L) | ₹2,500 (income ≤ ₹3.5L) |
| Surcharge (income > ₹1Cr) | 12% | 15% | 15% |
| Education cess | 3% | 3% | 3% |
| Transport allowance | ₹9,600/yr | ₹19,200/yr | ₹19,200/yr |
Frequently Asked Questions
Why was the Section 87A rebate ₹5,000 in FY 2016-17 but only ₹2,500 in FY 2017-18?
The Budget 2016 (Finance Act 2016) raised the 87A rebate from ₹2,000 to ₹5,000 to provide greater relief to small taxpayers. However, Budget 2017 reduced it back to ₹2,500, arguing the relief had overshot the intent. The eligibility threshold (income ≤ ₹5,00,000) remained the same in both years. The rebate was subsequently enhanced to ₹12,500 from FY 2019-20 and further restructured under the new regime from FY 2023-24.
What is the 25% concessional corporate tax rate introduced in Budget 2016?
Budget 2016 introduced a 25% tax rate for new domestic manufacturing companies incorporated on or after 1 March 2016, provided they do not claim specified deductions/incentives. This was meant to attract fresh manufacturing investment. Separately, existing domestic companies with annual turnover ≤ ₹5 crore were taxed at 29% (plus surcharge and cess) for FY 2016-17, down from the standard 30%.
Was there a cash transaction limit introduced in Budget 2016?
Yes. Section 269ST was proposed (though it came into force from FY 2017-18) to restrict cash receipts of ₹2,00,000 or more from a single person in a day, or in a single transaction, or in transactions relating to one event. In FY 2016-17, the precursor was the tightening of Section 269SS/269T limits and increased reporting requirements, ahead of demonetisation in November 2016.
What was the difference between transport allowance and the current standard deduction?
In FY 2016-17 there was no standard deduction for salaried employees. Instead, employees could claim a tax-free transport allowance of ₹19,200 per year (₹1,600/month, raised from ₹9,600 in FY 2015-16) plus a medical reimbursement exemption of up to ₹15,000 per year on submission of bills. The standard deduction of ₹40,000 was introduced only from FY 2018-19 (Budget 2018), replacing transport allowance and medical reimbursement.
What was the surcharge rate on high-income individuals in FY 2016-17?
Individuals with net taxable income exceeding ₹1 crore were subject to a surcharge of 15% on the income tax payable. Marginal relief was available so that the additional tax due to the surcharge did not exceed the income above ₹1 crore. The surcharge applied in addition to the 3% education cess (2% education cess + 1% secondary and higher education cess) on the tax plus surcharge amount.
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