Income Tax Rules: Those who opt the old tax regime will continue to get exemptions on investments.
From April 1, the new financial year will come into effect, which will lead to several new changes. But it is the change in the income tax rules that will impact the users most. She announced in her Budget speech this year that a new tax regime will come into effect that will several benefits to the assessors. This will be the default tax regime unless a taxpayer chooses the old regime while filing the income tax return (ITR).
Under the new regime, the tax rebate limit will be enhanced to Rs 7 lakh from the existing Rs 5 lakh. This means that no tax would be levied on individuals with annual income of up to Rs 7 lakh under the new tax regime. Experts say the move will pish salaried class taxpayer to switch to new tax regime.
Last week, the government amended the Finance Bill after which individuals earning marginally higher income than no-tax ceiling of Rs 7 lakh will pay tax only on the differential income. Explaining the provision, the finance ministry said that under the new tax regime from April 1, if a taxpayer has annual income of Rs 7 lakh he/she pays no tax. But if if a taxpayer has income of Rs 7,00,100 he/she he pays tax of 25,010. Thus, an additional income of ₹ 100 leads to a tax of Rs 25,010.
A five-slab structure will apply now under the new regime, also raising the no-tax slab by Rs 50,000. Income between Rs 0-3 lakh will have no tax; it was zero to Rs 2.5 lakh earlier.
From there on, annual income slabs and tax rates will be as follows:
- Income part from Rs 3 lakh and 6 lakh will be taxed at 5 per cent
- Rs 6 lakh to Rs 9 lakh will be taxed at 10 per cent
- Rs 9 lakh to 12 lakh will be taxed at 15 per cent
- Rs 12 lakh to 15 lakh will attract a 20 per cent tax
- Rs 15 lakh and above will be taxed at 30 per cent
The new tax regime was introduced in 2020 and will have none of the usual exemptions on insurance premium, mutual funds and other such investments.
It is to be noted that those who stick with the old tax regime will continue to get exemptions on investments, which are then used to figure out their final taxable income. Rates and slabs under the old tax regime remain unchanged.
With the new tax regime, the government brought down the highest applicable tax rate in India after surcharges, from 42.7 per cent to 39.