Income Tax Slabs: The first full Budget presented by the Modi 3.0 government, unveiled by Finance Minister Nirmala Sitharaman on Tuesday, brought in some important amendments to the tax system, especially the New Tax System. The finance minister made some changes in the New Tax Regime tax slabs, which will particularly favour the middle-class taxpayers.
The Standard Deduction has also been raised to Rs 75,000 from the previous Rs 50,000, indicating a positive shift for the Middle Class. Furthermore, adjustments have been made to the tax slabs, where individuals within the income range of Rs 3-7 lakh are mandated to pay a 5% tax rate. Similarly, those falling in the income brackets of Rs 7-10 lakh and Rs 10-12 lakh have taxation responsibilities of 10% and 15% respectively.
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In her first interaction with the media, FM Sitharaman said the rejigging of tax slabs will be a relief for the middle class and they are going to have more money in hand.
Here are the new tax slabs under the New Tax Regime:
Up to Rs 3 lakh: Nil
Rs 3 lakh to Rs 7 lakh: 5%
Rs 7 lakh to Rs 10 lakh: 10%
Rs 10 lakh to Rs 12 lakh: 15%
Rs 12 lakh to Rs 15 lakh: 20%
Above Rs 15 lakh: 30%
Here are the tax slabs for Old Tax Regime
The old income tax regime have been kept unchanged.
Up to Rs 2.5 lakh: Nil
Rs 2,50,001 to Rs 5 lakh: 5%
Rs 5,00,001 to Rs 10 lakh: 20%
Above Rs 10 lakh: 30%
Old Tax Regime vs New Tax Regime: Which one is better
Dr. Suresh Surana, a practising chartered accountant, explained the tax calculation under both tax regimes:
Old Tax Regime | Tax Rates | New Tax Regime | Tax Rates | |
Prevailing Tax Slabs | Proposed Tax Slabs | |||
Upto 2,50,000 | Nil | Upto Rs. 3,00,000 | Upto Rs. 3,00,000 | Nil |
2,50,001 to 5,00,000 | 5% | Rs. 3,00,001 to Rs. 6,00,000 | Rs. 3,00,001 to Rs. 7,00,000 | 5% |
5,00,001 to 10,00,000 | 20% | Rs. 6,00,001 to Rs. 9,00,000 | Rs. 7,00,001 to Rs. 10,00,000 | 10% |
Above Rs. 15,00,000 | 30% | Rs. 9,00,001 to Rs. 12,00,000 | Rs. 10,00,001 to Rs. 12,00,000 | 15% |
|
| Rs. 12,00,001 to Rs. 15,00,000 | Rs. 12,00,001 to Rs. 15,00,000 | 20% |
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| Above Rs. 15,00,000 | Above Rs. 15,00,000 | 30% |
Further, the threshold for salary standard deduction u/s 16(ia) of the IT Act has been proposed to be enhanced from Rs. 50,000 to Rs. 75,000 in the new tax regime.
Accordingly, Salaried individual taxpayers earning up to Rs 7,75,000 can utilize the standard deduction under section 16(ia) of the Income Tax Act, amounting to Rs. 75,000, and subsequently claim a rebate under section 87A of up to Rs. 25,000, effectively reducing their tax liability to zero.
Additionally, for individuals earning over Rs. 5 crores, the concessional surcharge rate of 25% applies under the new tax regime vis-à-vis the 37% under the old tax regime, thereby lowering the effective tax rate from 42.744% to 39%. Hence, those with a total income exceeding Rs. 5 crores may consider opting for the new tax regime to benefit from this reduced tax rate.
The difference in the tax rates (under the new tax regime) would be as follows:
Proposed Slab rates | Rate of Tax | Amount of Tax | Existing Slab rates | Rate of Tax | Amount of Tax | Incremental tax / (savings) |
0 – 300,000 | NIL | 0 – 300,000 | NIL | |||
300,001 – 700,000 | 5% | 20,000 | 300,001 – 600,000 | 5% | 15,000 | 5,000 |
700,001 – 10,00,000 | 10% | 30,000 | 600,001 – 900,000 | 10% | 30,000 | |
10,00,001 – 12,00,000 | 15% | 30,000 | 900,001 – 12,00,000 | 15% | 45,000 | (15,000) |
12,00,001 – 15,00,000 | 20% | 60,000 | 12,00,001 – 15,00,000 | 20% | 60,000 | |
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| Tax Savings |
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| 10,000 |