Finance Minister Arun Jaitley presented Union Budget 2016 on February 19, 2016. There were no changes in the income tax slabs for financial year 2016-17 and assessment year 2017-18.

However, he did give a tax rebate for individuals who falls under lower tax rebate. The two major changes is ceiling of tax rebate for tax payers with up to Rs 5 lakh annual income to be raised to Rs 5,000 from Rs 2,000 currently.

There is also a proposal to increase the tax deduction under rent paid for non home owners, who get a HRA. The tax exemption limit same has been hiked to Rs 60,000.

What is Financial Year(FY) and Assessment Year(AY)?

A financial year is one that is a of one year and is between 1st April to 31st March of the following year, in which all financial information are reported.

Assessment Year (AY) on the other hand is the income of a particular financial year, which is assessed in the following financial year, which is known as the assessment year.

Let us cite this with an example. Let us say that you earn an income of Rs 5 lakhs, between April 2016 and March 31, 2017. Then we say that this is the financial year 2016-17. You would file your income tax anytime until July 31, 2017. So, for you the assessment year would be 2016-17.

Normally, your tax slab would depend on what the Union Budget announces. If it increases the tax limit, than your tax slab changes automatically. If for example, the Union Budget had to increase the minimum amount for tax paid from Rs 2.5 lakhs to Rs 3 lakhs, than the tax slab would change accordingly.

Note: Tax rates are excluding Surcharge, Education Cess and Secondary and Higher Education Cess.

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