Budget decoded | How Rs 12 lakh can turn tax free; new tax slabs

"Taxpayers all across have been benefited to a greater extent with changes in slab and rebates," Amit Maheshwari, Tax Partner, AKM Global, said.
Budget decoded | How Rs 12 lakh can turn tax free; new tax slabs
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Finance Minister Nirmala Sitharaman in her Budget speech did announce the much-expected overhaul in personal income tax income rules. Not only did she increase the income cap for no tax from Rs 7 lakh to 12 lakh, she has also changed the income tax slabs under the New Tax regime.

Under the new tax regime, there is no tax till Rs 4 lakh and from Rs 4 lakh to Rs 8 lakh there will be 5% slab and from Rs 8 lakh to Rs 12 lakh, slab rate will be 10%.

From Rs 12,00,001 to Rs 16 lakh, there will be 15% tax slab and from R 16,00,001 to Rs 20 lakh, there will be 20 tax slab.

From Rs 20,00,001 to Rs 24 lakh, tax slab will be 25%. For those who are earning above Rs 24 lakh, tax slab will be 30%.

So, anyone whose annual taxable income is more than Rs 12 lakh, in fact Rs 12.75 lakh, will be taxed as per the new tax slab.

A tax payer in the new regime with an income of Rs 12 lakh will get a benefit of Rs 80,000 in tax (which is 100% of tax payable as per existing rates).

A person having income of Rs 18 lakh will get a benefit of Rs 70,000 in tax (30% of tax payable as per existing rates).

A person with an income of Rs 25 lakh gets a benefit of Rs 1,10,000 (25% of his tax payable as per existing rates).

No changes were announced in the old tax regime, where the basic exemption limit remains at Rs 2.5 lakh.

Amit Maheshwari, Tax Partner, AKM Global, a tax and consulting firm, says: "Taxpayers all across have been benefited to a greater extent with changes in slab and rebates. Notable point, no announcement is made in old tax regime."

Meanwhile, the FM also announced that the New direct tax bill will be introduced in the budget session of parliament.

"The new income-tax bill will carry forward the same spirit of "Nyaya"," said the FM adding that the new bill will be clear and direct in text with close to half of the present law, in terms of both chapters and words.

It will be simple to understand for taxpayers and tax administration, leading to tax certainty and reduced litigation.

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