Finance Minister Nirmala Sitharaman has slashed the personal income tax rates but provided to forgo exemptions, as she announced the Union Budget for the Financial Year 2020-2021 today, in the Lok Sabha.
As per the new regime, persons earning upto Rs. 5 lakhs will be exempted from paying any taxes.
Persons having an income between Rs. 5 lakhs and 7.5 lakhs will be taxed at 10% of their income, instead of 20%.
BREAKING: @nsitharaman announces revised rates of personal income tax:Upto 5L- no tax5-7.5L: 10% tax7.5 - 10L: 15% tax10 - 12.5L: 20% tax 12.5 - 15L: 25% tax#Budget2020— Live Law (@LiveLawIndia) February 1, 2020
BREAKING: @nsitharaman announces revised rates of personal income tax:Upto 5L- no tax5-7.5L: 10% tax7.5 - 10L: 15% tax10 - 12.5L: 20% tax 12.5 - 15L: 25% tax#Budget2020
Similarly, persons falling in the come group of 7.5 lakhs to 10 lakhs will pay 15% tax. In the previous regime, they were required to pay 20% of their incomes.
Persons earning between Rs. 10 lakhs and 12.5 lakhs will be charged at 20%. Ealier, they were taxed at 30%.
A 5% tax cut has also been provided to persons earning between Rs. 12.5 lakhs and 15 lakhs. They will now be charged 25% tax instead of 30%.
No changes have been made for persons earning above Rs. 15 lakhs and they will continue to pay tax at 30% rate.
During her speech, Sitharamn said that she was shocked to see that in the present regime, more than one hundred exemptions and deductions of different nature were being provided, leading to utter complexity.
"I have removed around 70 of them in the new simplified regime. We will review and rationalise the remaining exemptions and deductions in the coming years with a view to further simplifying the tax system and lowering the tax rate," she said.
It is noteworthy however that the new tax regime is optional for the taxpayers and an individual who is currently availing more deductions & exemption under the IT Act may choose to avail them and continue to pay tax in the old regime.
She also pointed out that in the new tax regime, substantial tax benefit will accrue to a taxpayer depending upon exemptions and deductions claimed by him. Thus now, a person earning Rs 15 lakh per anum and not availing any deductions will pay Rs 1.95 lakh tax in place of Rs 2.73 lakh now.
The following picture gives a comprehensive view of the new and old tax rates:
Click here to read Full Text of the Budget Speech