New Personal Income Tax Regime
Union Budget 2020 has proposed a new personal tax regime with new income tax slabs and their respective tax rates. Having said that, the old personal income tax regime would still prevail and individuals would have an option to stay in the old tax regime. So, if one move to the new income tax regime then he/she needs to forgo the rebate and exemptions. Following are the income tax slabs with tax rates in the new regime:
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Income Slabs (in Rs)
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Old Tax Rates (%)
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New Tax Rates (%)
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Up to 2.5 Lakhs
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0
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0
|
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2.5 Lakhs to 5 Lakhs
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5*
|
5
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5 Lakhs to 7.5 Lakhs
|
20
|
10
|
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7.5 Lakhs to 10 Lakhs
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20
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15
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10 Lakhs to 12.5 Lakhs
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30
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20
|
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12.5 Lakhs to 15 Lakhs
|
30
|
25
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15 Lakhs and above
|
30
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30
|
|
* Rebate of 12,500 for income up to Rs 5 Lakhs applicable which technically leads to no tax to be paid up to Rs 5 Lakhs
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Say for instance, if your income is Rs 15 lakh then, you would be paying tax of Rs 2.73 lakh as per the old tax regime and Rs 1.95 lakh as per the new tax regime. However, here we have not assumed any deductions.
Looking at the above illustration, you might feel that the new income tax regime is beneficial. However, in the new income tax regime, there are no rebate and exemptions applicable. This means that the exemptions such as House Rent Allowance (HRA), Leave Travel Allowance (LTA), exemption on food coupons and various other deductions like section 80C, 80 CCD, 80D, etc. are not available in the new regime.
With the new regime, your income tax calculated on gross level might seem to be lower than the old tax regime. But, with forgoing the exemption and deductions part, there might not be huge savings from shifting to the new tax regime. Having said that, the new regime adds to the convinience of the tax payer.