Nirmala Sitharaman has proposed a new simplified income tax regime during the presentation of the Annual Budget 2020 on Saturday. The new tax regime, which will be optional comes with a catch, as under the new regime, the taxpayers will not be able to avail of any deductions or exemptions which was earlier allowed to lower the amount of salary that was taxed.
According to the new tax regime, for incomes between 5 lakh to 7.5 lakh, 10% tax will be deducted; between 7.5 lakh to 10 lakh, 15% tax will be deducted; between 10 lakh to 12.5 lakh, 20% tax will be deducted; between 12.5 lakh to 15 lakh, 25% tax will be deducted and for above 15 lakh, 30% tax will be deducted.
However, the new rates will be applicable only to those individuals who forgo certain exemptions and deductions.
The new income tax regime which reduces the tax of the salaried employee will be optional for the taxpayers. This means that either they can stick to the old regime or select the new one.
New income tax rates for the assessment year 2021-22:
No tax for income up to Rs 5 lakh
10% tax for income between Rs 5 lakh to Rs 7.5 lakh
15% tax for income between Rs 7.5 lakh to Rs 10 lakh
20% tax for income between Rs 10 lakh to Rs 12.5 lakh
25% tax for income between Rs 12.5 lakh to Rs 15 lakh
30% tax for income above Rs 15 lakh
In the new tax regime, the taxpayers’ income won’t include the rebates and exemptions which is included in the old regime to lower down the overall tax paid.
This was the second budget for Sitharaman, who became the second woman finance minister after Indira Gandhi to do so in the history of independent India.
This year, Sitharaman also beat her own last year’s record to deliver the longest budget speech ever.
Ahead of the Budget presentation, the finance minister and her team comprising MoS Finance Anurag Thakur and other officials met President Ram Nath Kovind.
Like the previous Union Budget, Nirmala Sitharaman has this time too replaced the Budget briefcase — the iconic briefcase used by former finance ministers — with the traditional “bahi khata” in keeping with Indian tradition.