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 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 Salaryof 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.
NetIncome Tax (including health and education cess)
75,400
46,800
What is an Income Tax on a Salaryof 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
Deductionu/s 80 C
1,50,000
nil
NetTaxable Income
8,50,000
10,00,000
NetIncome Tax
85,800
78,000
How can an Individual Save Tax ifa salary is below 10 lakhs?
If an individualhas a salary below Rs 10 lakhs p.a., he/she may opt for an old Income taxregime and must try to lower the tax burden as much as possible by animplementation of the following-
Exhaust80 C limit of Rs 1,50,000
Reducea medical expenditure, and Invest more in health insurance and avail adeduction
Claimfor home loan interest
Anadditional tax benefit is received if you are the NPS contributor.
Avail astandard 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.
The 2022 standard deduction is $12,950 for single filers, $25,900 for joint filers or $19,400 for heads of household. For the 2023 tax year, those numbers rise to $13,850, $27,700 and $20,800, respectively.
In India, surcharge is levied if an individual's income is more than Rs. 50 lakh and varies with the income bracket. However, according to Budget 2023, the maximum surcharge that can be levied on an individual's income has been restricted to 25% if you opt for the new tax regime.
3. Is it possible to claim 80C deductions and choose new income tax regime? No, unlike the old/existing tax rate regime, the new tax rate regime does not enable many deductions and exclusions. If the taxpayer chooses the New regime's concessionary tax slab rates, deductions under Section 80C are not available.
What is the formula for calculating basic salary? Here's how the basic salary gets calculated from parameters like gross pay and allowances: Basic salary = Gross pay- total allowances (medical insurance, HRA, DA, conveyance, etc.)
There are various ways to save tax for those earning above ₹20 lakhs, including investing in tax-saving mutual funds, PPF, NPS, health insurance, donations to charity, home loan, rent paid, education loan, and offsetting expenses incurred on generating income from investments.
The personal exemption for tax year 2023 remains at 0, as it was for 2022, this elimination of the personal exemption was a provision in the Tax Cuts and Jobs Act.
If you are turning your attention to tax planning for 2023, keep this in mind: Tax rates — as opposed to brackets — did not change compared to 2022. The IRS will use the same seven rates.
Inflation last year reached its highest level in the United States since 1981. As a result, the IRS announced the largest inflation adjustment for individual taxes in decades: 7.1 percent for tax year 2023.
The concept of TDS was introduced with an aim to collect tax from the very source of income. As per this concept, a person (deductor) who is liable to make payment of specified nature to any other person (deductee) shall deduct tax at source and remit the same into the account of the Central Government.
Every fiscal year, an individual or Hindu Undivided Family (HUF) must select between the old and new tax regimes. If they do not have any business income, this is applicable. Individual taxpayers and HUFs with business income are eligible to choose the new income tax regime.
The benefit of standard deduction available to salaried and pensioners (including family pensioners) have been introduced under the new tax regime. An individual opting for the new tax regime for FY 2023-24 will be eligible to claim a standard deduction of Rs 50,000.
Section 80D offers tax deductions on health insurance premiums of up to a maximum limit of ₹ 25,000 in a financial year. You can claim deductions for a policy bought for yourself, your spouse and your dependent children.
The individual income tax (or personal income tax) is a tax levied on the wages, salaries, dividends, interest, and other income a person earns throughout the year. The tax is generally imposed by the state in which the income is earned.
Tax tables are divided by income ranges and filing status. Tax tables are commonly used by individual and corporate taxpayers with modest income levels while high-income earners use more detailed tax rate schedules. Tax tables are updated by the IRS every year.
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