New Delhi: New income tax slabs with reduced rates were introduced by finance minister Nirmala Sitharaman in her Union Budget 2020 speech on Saturday, providing big relief to the middle class as was expected.
Sitharaman in her budget speech proposed an optional tax regime. If an individual opts for the new income tax regime, he/she will no more be eligible for tax exemptions. To avail the new income tax rates, taxpayers will have to let go of 70 exemptions. They would still be able to avail 30 exemptions.
Here are the newly proposed income tax slabs:
No income tax for those earning less than Rs 5 lakh.
Income between Rs 5 lakh and Rs 7.5 lakh annually will be taxed at 10 per cent.
Income between Rs 7.5 lakh and Rs 10 lakh will be taxed at 15 per cent.
Income between Rs 10 lakh and Rs 12.5 lakh will be taxed at 20 per cent.
Income earning between Rs 12.5 lakh and Rs 15 lakh will be taxed at 25 per cent.
Income above Rs 15 lakh will continue to be taxed at 30 per cent.
The finance minister said that a person earning above Rs 15 lakh per anum and not availing any deductions will pay Rs 1.95 lakh tax, instead of Rs 2.73 lakh now. The tax calculations, however, would vary based on the number and type of deductions one used to avail.
It is important to note that tax payers can continue to pay taxes at current rates without shifting to the new regime. However, in order to avail the new tax rates, the individuals need to let go of exemptions.
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