The taxes you pay could be adjusted in the near future, as Finance Minister Nirmala Sitharaman announced significant changes during her budget speech, aimed at supporting the hard-working middle-class taxpayers. These changes are referred to as new income tax slabs, which have been designated as the default tax regime by the government. However, the previous income tax slabs regime still remains available, offering taxpayers a choice between the two when paying their taxes. The question remains, which of the two regimes is preferable?
The new income tax slab regime proposed by Finance Minister Nirmala Sitharaman includes changes to the tax exemption limit, reducing the number of slabs, and revising tax rates. Under this new regime, the exemption limit has been increased to ₹7 lakh and the number of slabs has been reduced to five.
The revised tax rates are: 0% for an income of ₹3 lakh, 5% for ₹3 lahks to ₹6 lahks, 10% for ₹6 lahks to ₹9 lahks, 15% for ₹9 lahks to ₹12 lakh, 20% for ₹12 lakh to ₹15 lakh, and 30% for income above ₹15 lakh. Additionally, the surcharge rate has been reduced from 37% to 25% on the highest tax rate of 42.74%, which results in a maximum rate of 39%. The standard deduction has also been extended to this new regime, offering a benefit of ₹52,500 for salaried individuals with an income of ₹15.5 lakh or more.
he old income tax slab regime still remains, but the new regime is now the default option with the option for citizens to continue using the old regime. The old regime included an exemption on income up to ₹2.5 lakh, 5% for ₹2.5 lakh to ₹5 lakh, 20% for ₹5 lakh to ₹10 lakh, and 30% for income above ₹10 lakh.
To determine which regime is better, it is important to consider factors such as deductions, exemptions, and personal income levels. A leading tax and financial services software platform has determined that, without any deductions, the new regime is more beneficial and offers savings on taxes compared to the old regime. However, this calculation does not take into account deductions that are available under the old regime.