A taxpayer earning Rs 15 lakh will save Rs 78,000 in tax under the new regime, FM said in Budget 2020 speech.
FM Nirmala Sitharaman
Finance Minister Nirmala Sitharaman, in Budget 2020, added three income tax slabs in the tax structure. In Budget 2020, FM Sitharaman tried to put more money in the hands of taxpayers by curtailing the incentives to save. A taxpayer earning Rs 15 lakh will save Rs 78,000 in tax under the new regime, FM said in Budget 2020 speech.
New income tax slabs and ratesNo change in tax exemption given to incomes up to Rs 5 lakh in interim.
| Old rate | Annual Income | New rate |
| 5% | Upto Rs 2.5 lakh | NIL |
| 20% | Rs 2.5 lakh – 5 lakh | 5% |
| 20% | Rs 5 lakh – 7.5 lakh | 10% |
| 20% | Rs 7.5 lakh – 10 lakh | 15% |
| 30% | 10 lakh – 12.5 lakh | 20% |
| 30% | 12.5 lakh – 15 lakh | 25% |
| 30% | Above 15 lakh | 30% |
Under various sections of Chapter VI-A, this is without any deductions. If the taxpayer claims deductions for Rs 2.5 lakh (Rs 50,000 standard deduction, Rs 1.5 lakh under 80C and Rs 50,000 contribution to NPS), his tax will not change. If he also claims a house rent allowance (HRA) exemption or home loan interest deduction of Rs 2 lakh, his tax in the old regime would be lower by Rs 46,800.
Under chapter VI-A, salaried taxpayers who opt for the new regime will have to forgo the standard deduction as well as the exemptions, including the HRA. Medical insurance premium and even the leave travel allowance which is tax free if claimed once in a block of two years investment under Section 80C.
Some of the exemptions and deductions you won’t get in new regime
-Section 80C investments -House rent allowance -Housing loan interest -Leave travel allowance -Medical insurance premium -Standard deduction -Savings bank interest
-Education loan interest
Some 50 tax exemptions have been left untouched. These include.
-Standard deduction on rent -Agricultural income -Income from life insurance -Retrenchment compensation -VRS proceeds
-Leave encashment on retirement
Taxpayers have the to switch to the new tax structure depending on their financial situation. Taxpayers who avail several exemptions and deductions such as house rent allowance and 80C deductions may not benefit from switching to the new system.
Taxpayers with income between Rs 50 lakh and Rs 1 crore continue to pay 10 percent surcharge on the tax. The surcharge is 15 percent for income between Rs 1 crore and Rs 2 crore, 25 percent for between Rs 2 crore and Rs 5 crore and 37 percent for income over RS 5 crore.
Here is how the new tax regime will affect the tax outgo of taxpayers at different income levels.
Income: Rs 15 lakh
| Sr no | Old regime (Without deductions) | Old regime (With deductions) | New regime |
| Income | Rs 15 lakh | Rs 15 lakh | Rs 15 lakh |
| Deductions/exemptions | Nil | Rs 2,00,000 | Nil |
| Taxable income | Rs 15,00,000 | Rs 13,00,000 | Rs 15,00,000 |
| Tax | Rs 2,62,500 | Rs 2,02,500 | 1,87,500 |
| Cess @ 4% | 10,500 | Rs 8,100 | Rs 7,500 |
| Total tax | Rs 2,73,000 | Rs 2,10,600 | Rs 1,95,000 |
Income: Rs 30 lakh
| Sr no | Old regime (Without deductions) | Old regime (With deductions) | New regime |
| Income | Rs 30 lakh | Rs 30 lakh | Rs 30 lakh |
| Deductions/exemptions | Nil | Rs 4,25,000 | Nil |
| Taxable income | Rs 30,00,000 | Rs 25,75,000 | Rs 30,00,000 |
| Tax | Rs 7,12,500 | Rs 5,85,000 | 6,37,500 |
| Cess @ 4% | 28,500 | Rs 23,400 | Rs 25,500 |
| Total tax | Rs 7,41,000 | Rs 6,08,400 | Rs 6,63,000 |
Income: Rs 60 lakh
| Sr no | Old regime (Without deductions) | Old regime (With deductions) | New regime |
| Income | Rs 60 lakh | Rs 60 lakh | Rs 60 lakh |
| Deductions/exemptions | Nil | Rs 4,25,000 | Nil |
| Taxable income | Rs 60,00,000 | Rs 55,75,000 | Rs 60,00,000 |
| Surcharge | Rs 1,61,250 | Rs 1,48,500 | 1,53,750 |
| Cess @ 4% | Rs 70,950 | Rs 65,340 | Rs 67,650 |
| Total tax | Rs 18,44,700 | Rs 16,98,840 | Rs 17,58,900 |
Income: Rs 1.2 crore
| Sr no | Old regime (Without deductions) | Old regime (With deductions) | New regime |
| Income | Rs 1.2 crore | Rs 1.2 crore | Rs 1.2 crore |
| Deductions/exemptions | Nil | Rs 4,25,000 | Nil |
| Taxable income | Rs 1,20,00,000 | Rs 1,15,75,000 | Rs 1,20,00,000 |
| Surcharge | Rs 5,11,875 | Rs 4,92,750 | 5,00,625 |
| Cess @ 4% | Rs 1,56,975 | Rs 1,51,110 | Rs 1,53,525 |
| Total tax | Rs 40,81,350 | Rs 39,28,860 | Rs 39,91,650 |
| Tax | Rs 39,24,375 | Rs 4,92,750 | Rs 5,00,625 |
