As the new financial year starts in India from April 1, several changes in income tax rules will come into effect, including the introduction of new tax slabs. These changes were announced by Finance Minister Nirmala Sitharaman in her Budget speech earlier this year.
One of the most significant changes is that the new income tax regime will be the default option for taxpayers. However, taxpayers still have the option to choose the old tax regime while filing their income tax return (ITR). In the previous tax system, individuals were eligible to receive tax benefits through various means such as House Rent Allowance (HRA), deduction for the interest paid on their home loan, allowance for their children’s education, and a deduction for professional tax.
Those who choose the new tax regime will be taxed according to new slabs. The tax rebate limit has been increased to ₹7 lahks from the existing ₹5 lakh under the new regime, which means individuals with an annual income of up to ₹7 lakhs won’t be taxed. This move is expected to encourage the salaried class taxpayer to switch to the new tax regime.
What are the New Tax Slabs?
The new tax slabs are as follows:
- 5% tax on income between ₹3 lakh and ₹6 lakh
- 10% tax on income between ₹6 lakh and ₹9 lakh
- 15% tax on income between ₹9 lakh and ₹12 lakh
- 20% tax on income between ₹12 lakh and ₹15 lakh
- 30% tax on income above ₹15 lakh
However, the tax calculation is not a flat 15% for someone who earns ₹10 lakh. According to research, income up to ₹3 lakh won’t attract any tax. Income between ₹3 lakh and ₹6 lakh will be charged 5% (₹15,000 tax). Income between ₹6 lakh and ₹9 lakh will attract 10% tax (₹30,000 tax), and the remainder ₹1 lakh will attract a 15% tax rate (another ₹15,000). So, the total tax to be paid by the person will be ₹60,000.
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In addition to the aforementioned changes, it should be noted that the maximum exemption limit for leave encashment under Leave Travel Allowance (LTA) has been raised to Rs. 25 lakh per year. The limit for the above-mentioned information was ₹3 lakh since 2002.
Overall, these changes in income tax rules will have a direct impact on many people in India, and taxpayers need to understand the new tax regime and its slabs to make an informed decision while filing their ITR.