
NEW DELHI: Finance Minister Nirmala Sitharaman on Saturday gave the middle class and the common man enough reasons to smile when she announced her personal income tax proposals.
Not only did she increase the income threshold up to which no taxes would be levied from Rs 7 lakh to Rs 12 lakh, she also changed the income tax slabs that will lead to a substantial reduction in tax burden for all taxpayers under the new tax regime. With these changes, and the standard deduction of Rs 75,000, an individual earning Rs 12.75 lakh a year will have to pay no taxes under the new tax regime.
However, if one’s taxable income crosses that threshold, all the income would be taxed as per the new slabs, which are both magnanimous and generous.
The new tax slab increases the basic exemption limit from Rs 3 lakh to Rs 4 lakh, which means the first Rs 4 lakh would attract no taxes. Income from Rs 4-8 lakh would attract a rate of 5%, Rs 8-12 lakh would attract 10%.
From Rs 12,00,001 to Rs 16 lakh, there will be 15% tax and from Rs 16,00,001 to Rs 20 lakh, the tax rate would be 20%. The government has introduced a new tax slab of 25%, which would be applicable on income from Rs 20,00,001 to Rs 24 lakh. The highest tax slab of 30% kicks in only if the income crosses Rs 24 lakh per annum.
A taxpayer in the new regime with Rs 12 lakh income will save Rs 80,000 in tax (which is 100% of tax payable as per existing rates). A person earning Rs 18 lakh will get a tax benefit of Rs 70,000 (30% of tax payable as per existing rates), while a person with an income of Rs 25 lakh gets a benefit of Rs 1,10,000 (25% tax payable as per existing rates).
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.