Budget 2020: Finance Minister Nirmala Sitharaman announced a change in the income tax slabs in her budget speech. The new slabs have significantly reduced the taxes for most of the brackets. If you are earning between Rs 10 lakh to Rs 12.5 lakh and between Rs 12.5 lakh and Rs 15 lakh, you will have to pay lesser tax than before.
Individuals in the income bracket of Rs 10 lakh to Rs 12.5 lakh will now have to pay 20 per cent tax, while those in the Rs 12.5 lakh and Rs 15 lakh will have to pay 25 per cent. Currently, the tax slabs are significantly different than the new slabs.
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The basic exemption is for income up to Rs 2.5 lakh, while from Rs 2.5 lakh to Rs 5 lakh is 5 per cent. For income between Rs 5 lakh and Rs 10 lakh, the current slab is 20 per cent and for income above Rs 10 lakh the income tax slab is 30 per cent.
As per the new tax slabs, individuals earning Rs 5 lakh to Rs 7.5 lakh will be taxed at 10 per cent and those from Rs 7.5 lakh to Rs 10 lakh would be levied 15 per cent. Those earning above Rs 15 lakh would need to pay 30 per cent tax.
The new income tax regime, however, will not have any exemption or deductions and will be optional.
"In this new personal income tax regime, income tax rates will be significantly reduced for the individuals who forgo certain exemptions and deductions. A person earning Rs 15 lakh per annum and not availing any deductions will now pay Rs 1.95 lakh tax in place of Rs 2.73 lakh," she said in her Budget 2020 speech.
The Finance Minister said that around 70 of more than 100 income tax deductions and exemptions have been removed in order to simplify tax system and lower tax rates.
Before the minister's announcements rumours were rife that the government would place the Rs 5 lakh to Rs 10 lakh income bracket under 10 per cent tax, while it would be 20 per cent for income between Rs 10 lakh and Rs 20 lakh. It was expected that the government would levy 30 per cent income for income above Rs 20 lakh to Rs 2 crore. Taxpayers were expecting a new tax slab of 35 per cent (without surcharges) for individuals earning Rs 2 crore per annum.