The income tax slabs in the new tax regime have been changed. As per the announcement, instead of 6, now there will be 5 income tax slabs.
The New Slabs and new Income tax rates under the new income tax regime will be as follows:
- Between Rs 0 to Rs 3 lakh – 0% tax rate
- Between Rs 3 to 6 lakh – 5%
- Between Rs 6 to 9 lakh – 10%
- Between Rs 9 lakh to Rs 12 lakh – 15%
- Between Rs 12 lakh to Rs 15 lakh – 20%
- Above Rs 15 lakh above – 30%
Here is the comparison between the old vs new regime tax rates.
A rebate under section 87A has been enhanced under the new tax regime from current income level of Rs 5 lakh to Rs 7 lakh. Thus, individuals opting for new income tax regime having income upto Rs 7 lakh will not pay any taxes. That is you have Tax-Free Income of Rs 7 lakh under new regime.
As per the FM, This will provide major relief to all tax payers in the new regime. An individual with an annual income of Rs 9 lakh will be required to pay only Rs 45,000 in taxes. This is only 5% of his/her income. It is also a reduction of 25% on what they were required to pay till now (i.e., Rs 60,000). Similarly, an individual with an income of Rs 15 lakh would be required to pay only Rs 1.5 lakh or 10% of his or her income, a reduction of 20% from the existing liability of Rs 1,87,500/.
Also the new income tax regime will now be the default tax regime. However, individuals will still have an option to continue with the old income tax regime if they want. The surcharge of highest rate has been reduced too from 37% currently to 25% in the new tax regime.
All in all, this move has been announced to increase the adoption of the new tax regime which had failed to pick up since it came into being. People still have been preferring the old tax regime due to the various deductions and tax benefits it offers.