To provide considerable relief to individual taxpayers, the Finance Ministry has proposed the whole new tax regime in the Budget 2020′. The Income Tax rates in India have been slashed a bit, and the tax slabs have now been redesigned for the individual taxpayers who will opt to forgo all the deductions and exemptions. The new Income Tax slab will impact post-budget 2020 to the people having a salary of Rs 8 lakhs & Rs 10 lakhs per annum.
What are the New Income Tax Slab changes in Budget 2020?
The comparison between the pre and post-budget 2020 tax rates mentioned in the table below:
| Taxable Income Range (In Rs) | Tax Rate before Budget 2020 (Existing) | Tax Rate after Budget 2020 |
| 0-2.5 lakhs | Exempted | Exempted |
| 2.5-5 lakhs | 5% | 5% |
| 5-7.5 lakhs | 20% | 10% |
| 7.5-10 lakhs | 20% | 15% |
| 10-12.5 lakhs | 30% | 20% |
| 12.5-15 lakhs | 30% | 25% |
| Above 15 lakhs | 30% | 30% |
Read our article:A Complete Guide on How to Save Income Tax
What Deductions and Exemptions Removed in new income Tax slab?
The taxpayers are provided with an option to either continue with the old tax regime or to opt for a new regime. If one will opt for a new income tax slab, then he/she will not be eligible to avail the deductions and exemptions as mentioned below-
- Leave Travel Allowances (LTAs) as provided in clause 5, section 10 of the Income Tax Act 1961[1]
- Housing Rent Allowances (HRAs) as provided in clause 13 A of section 10
- Deductions up to Rs 1, 50, 000 (under section 80 C for investments made towards insurance premium, provident fund, principal repayment of housing loan, etc.)
- The standard deduction of Rs. 50,000 under section 16
- The professional Tax Deduction under section 16
- Deduction of Interest under section 24 with respect to vacant or self-occupied property mentioned in sub-section 2 of section 23 (Loss under income from the house property for a rented house
- Any other deduction specified under chapter VI-A
- Others deductions/exemptions as prescribed from time to time
What is an Income Tax on a Salary of Rs.8 Lakhs Per Annum?
If an individual has a salary of Rs 8 lakh per annum, and he/she has opted for a new income tax slab regime, then an income tax will be Rs 46,800. It is calculated without any exemptions and deductions. An individual can save Rs 28,600 more as compared to an old tax regime. The table below will make the calculations more clear to you.
| Particulars | As per Tax Rate before Budget 2020 | As per Tax Rate after Budget 2020 |
| Income | 8,00,000 | 8,00,000 |
| Deduction u/s 80 C | 1,50,000 | Nil |
| Net Taxable Income | 6,50,000 | 8,00,000 |
| Net Income Tax (including health and education cess) | 75,400 | 46,800 |
What is an Income Tax on a Salary of Rs 10 Lakh Per Annum?
If an individual has a salary of Rs 10 lakh per annum, and if he/she has opted for a new tax regime, then an income tax will be Rs 78,000. An individual can save Rs 7,800 more as compared to an old tax regime. The table below will make calculations more clearly to you.
| Particulars | As per Tax Rate before Budget 2020 | As per Tax Rate after Budget 2020 |
| Income | 10,00,000 | 10,00,000 |
| Deduction u/s 80 C | 1,50,000 | nil |
| Net Taxable Income | 8,50,000 | 10,00,000 |
| Net Income Tax | 85,800 | 78,000 |
How can an Individual Save Tax if a salary is below 10 lakhs?
If an individual has a salary below Rs 10 lakhs p.a., he/she may opt for an old Income tax regime and must try to lower the tax burden as much as possible by an implementation of the following-
- Exhaust 80 C limit of Rs 1,50,000
- Reduce a medical expenditure, and Invest more in health insurance and avail a deduction
- Claim for home loan interest
- An additional tax benefit is received if you are the NPS contributor.
- Avail a standard deduction if you are the salaried person
Conclusion
If a taxable income is Rs 10 lakh per annum, then you will fall into the tax slab of Rs 10 lakhs to 12.5 lakhs. According to the new income tax slab rate, post budget 2020, 20% of your taxable income is however liable for the tax deduction. Hence, one can opt for the deductions or can save directly in the old tax regime.
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