The finance minister, Nirmala Sitharaman, proposed a new tax bracket for Indians in this year’s Union Budget. The proposed income tax bracket stands out as people can pick between the old tax regime and the new tax regime. The finance minister also introduced some other reforms in the funding offered to different sectors. However, the standout feature of the budget was the new tax regime. The new budget is introduced to increase the purchasing power of the citizens. With the aim to increase the incomes of different groups, the finance minister launched some schemes that can take the economy in an upward direction.
The Old Tax Regime vs The New Tax Regime
One of the most important things that every person looks for in a budget is the tax rates. Every citizen wants to know the tax they have to pay and if there is any tax relief offered by the government. People expected that Budget 2020 will increase their savings. Also, they wanted to see an increase in their income.
Budget 2020 tried to do exactly that. The finance minister introduced new tax brackets for almost every income group, and the tax percentage was reduced for different salaried people. However, things are not that easy. The ones who wish to pick the new tax regime must forgo their exemptions. However, not all the exemptions are removed from the tax filing. There were more than 100 tax deductions and exemptions offered to the taxpayers as per the old regime, but 70 of them are removed for the new tax regime.
People who don’t want to forgo their exemptions can pay taxes as per the old regime. It is something different about the 2020 budget. The finance minister has allowed the citizens to pick between the old regime and the new regime. If a citizen wants to forgo their exemptions, then they can pay as per the new income tax slab. The new regime has lower tax brackets. However, people who can’t forgo their exemptions can pay taxes as per the old regime. The tax percentage is higher in the old regime.
The new tax regime introduces lower tax rates for almost every income group. People earning salary up to Rs. 5 Lakhs don’t have to pay tax. However, the tax bracket for people earning more than Rs. 5 Lakhs starts from Rs. 2.5 Lakh and must pay 5% tax. Salaried people in the income group of Rs. 5 Lakhs to Rs. 7.5 Lakhs must pay 10% tax. The tax rate is 15% for people in the income group of Rs. 7.5 Lakhs to Rs. 10 Lakhs. People in the income group of Rs. 10 Lakhs to Rs. 12.5 Lakhs will be taxed at 20%. Salaried people in the income group of Rs 12.5 Lakhs to Rs. 15 Lakhs will be taxed 25%. People earning more than Rs. 15 Lakhs must pay tax at 30%.
Old Tax Regime vs New Tax Regime-
|Income Group||Old Tax Regime||New Tax Regime|
|Up to Rs. 2.5 Lakhs||Nil||Nil|
|Rs. 2.5 Lakhs to Rs. 5 Lakhs||5%||5%|
|Rs. 5 Lakhs to Rs. 7.5 Lakhs||20%||10%|
|Rs. 7.5 Lakhs to Rs. 10 Lakhs||20%||15%|
|Rs. 10 Lakhs to Rs. 12.5 Lakhs||30%||25%|
|Rs. 12.5 Lakhs to Rs. 15 Lakhs||30%||25%|
|Above Rs. 15 Lakhs||30%||30%|
However, cess and surcharge on income tax are the same for the old regime as well as the new regime.