New income tax regime vs old: What is good for you? Check comparison

Budget 2020: Bringing a revolutionary change in direct tax rates, Finance Minister Nirmala Sitharaman has proposed a new tax regime, under which 6 income tax slabs are introduced.

Budget 2020, income tax, income tax slabs, income tax rates, income tax new regime, Union Budget 2020, Union Budget India
Surcharge and cess shall be continued to be levied at the existing rates.

Budget 2020: Bringing a revolutionary change in direct tax rates, Finance Minister Nirmala Sitharaman has proposed a new tax regime, under which 7 income tax slabs are introduced and tax rates have been slashed on income up to Rs 15 lakh.

The slabs and tax rates under the new regime are –

  1. Up to Rs 2,50,000 – Nil
  2. From Rs 2,50,001 to Rs 5,00,000 – 5 per cent
  3. From Rs 5,00,001 to Rs 7,50,000 – 10 per cent
  4. From Rs 7,50,001 to Rs 10,00,000 – 15 per cent
  5. From Rs 10,00,001 to Rs 12,50,000 – 20 per cent
  6. From Rs 12,50,001 to Rs 15,00,000 – 25 per cent
  7. Above 15 lakh – 30 per cent

Surcharge and cess shall be continued to be levied at the existing rates.

Under the old regime, the tax slabs and rates are kept unchanged as declared in last year’s Budget. Acting finance minister Piyush Goyal, in the Interim Budget 2019, increased the tax rebate from Rs 2,500 to Rs 12,500 for taxpayers having taxable income up to Rs 5 lakh. So, tax liability of individuals (up to 60 years of age), Senior Citizens and Super Senior Citizens having taxable income up to Rs 5 lakh was brought to zero. During her first Budget later in 2019, India’s first female Finance Minister Nirmala Sitharaman introduced new surcharge rates of 25 per cent for income above Rs 2 crore and up to Rs 5 crore and 37 per cent surcharge on income above Rs 5 crore.

Tax slab in FY 2019-20:

Up to Rs 2,50,000: Nil (For Senior Citizens Rs 3 lakh and for Super Senior Citizens Rs 5 lakh)
From Rs 2,50,001 to 5,00,000 – 5 per cent
From Rs 5,00,001 to 10,00,000 – 20 per cent
Above Rs 10,00,000 – 30 per cent
Tax rebate – up to Rs 12,500 on taxable income up to Rs 5 lakh
Health and Education Cess – 4 per cent
Surcharges:
On income between Rs 50 lakh to Rs 1 crore – 10 per cent
Over Rs 1 crore to Rs 2 crore – 15 per cent
Over Rs 2 crore to Rs 5 crore – 25 per cent
Above Rs 5 crore – 37 per cent

Following tables show the difference in tax under old and new regime on same levels of taxable income for individuals below 60 years of age:

On Rs 5 lakh:

Tax comparison on taxable income of Rs 5 lakh.

So, there will be no difference in tax payable as no tax has to be paid.

On Rs 7.5 lakh:

Tax comparison on taxable income of Rs 7.5 lakh.

So, tax payable will be Rs 26,000 less under new regime on taxable income of Rs 7.5 lakh.

On Rs 10 lakh:

Tax comparison on taxable income of Rs 10 lakh.

So, tax payable will be Rs 39,000 less under new regime on taxable income of Rs 10 lakh.

On Rs 12.5 lakh:

Tax comparison on taxable income of Rs 12.5 lakh.

So, tax payable will be Rs 65,000 less under new regime on taxable income of Rs 12.5 lakh.

On Rs 15 lakh:

Tax comparison on taxable income of Rs 15 lakh.

So, tax payable will be Rs 78,000 less under new regime on taxable income of Rs 15 lakh.

On Rs 20 lakh:

Tax comparison on taxable income of Rs 20 lakh.

So, tax payable will be Rs 78,000 less under new regime on taxable income of Rs 20 lakh.

However, under new regime many deductions that were currently available will no longer be available.

The common and popular deductions are:

  • Exemption u/s 80C – Up to Rs 1.5 lakh
  • Exemption u/s 80D – Up to Rs 25,000 (For senior citizens Rs 50,000)
  • Tax rebate u/s 87A – Up to Rs 12,500 on taxable income up to Rs 5 lakh
  • Deduction on Home Loan interest – Up to Rs 2 lakh
  • Additional deduction on Home Loan interest on affordable houses u/s 80EEA – Up to Rs 1.5 lakh
  • Deduction on Auto Loan interest for purchase of electric vehicle u/s 80EEB – Up to Rs 1.5 lakh

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