In Budget 2020, a new income tax slab was introduced with an aim to simplify the existing tax structure. To this end, the new income tax regime removed around 70 deductions. It also offers reduced income tax rates for those individuals who wish to follow the new tax system.
Since taxpayers have the option for income tax return filing as per the new or old income tax regime, they need to gain a comprehensive idea regarding the former.
Given below is a complete guide regarding the newly introduced income tax slabs –
- Income up to Rs.2.5 lakh – Individuals are not required to pay any tax.
- Income between Rs.2.5 lakh and Rs.5 lakh – Income tax at a rate of 5%.
- Income within Rs.5 lakh to Rs.7.5 lakh – A rate of 10% is applicable for this slab.
- Earning between Rs.7.5 lakh to Rs.10 lakh – 15% tax applicable on income.
- Income between Rs.10 lakh to Rs.12.5 lakh – Tax payable at the rate of 20%.
- Earning between Rs.12.5 lakh to Rs.15 lakh – The rate applicable for this slab is 25%.
- Income over Rs.15 lakh – Income tax at a rate of 30%.
Additionally, it should be noted that those who choose to pay tax according to new income tax slabs cannot avail deductions on interests on post office balances, EPF, PPF, gratuity, insurance amount on maturity, a gift from an employer, etc.
However, exemptions offered under the section 80EEA on interest paid on a home loan have been extended by one year, which will significantly benefit individuals who have opted to purchase a house under the affordable housing scheme.
