As per data, as many as 5.3 crore taxpayers out of 5.78 crore claimed deductions of less than Rs 2 lakh while filing income tax returns.
Individuals having an annual salary income of over Rs 13 lakh and availing deductions of up to Rs 2 lakh will save on their tax outgo if they opt for the new tax regime proposed in the Budget, government sources said on February 2.
For those earning a salary of Rs 12 lakh and less and availing deductions of up to Rs 2 lakh, the old tax system will be beneficial as the tax outgo will be less compared to the proposed new structure.
As per data, as many as 5.3 crore taxpayers out of 5.78 crore claimed deductions of less than Rs 2 lakh (standard deduction, provident fund, home loan interest, contribution to national pension scheme, life insurance, medical insurance etc.) while filing income tax returns.
This means that about 90 percent of taxpayers actually claim deduction of less than Rs 2 lakh.
Offering an optional lower rate of income tax to individuals, Finance Minister Nirmala Sitharaman in the Budget 2020-21 proposed new tax slabs of 15 per cent and 25 per cent in addition to the existing 10 per cent, 20 per cent and 30 per cent.
Under the proposed tax slab, annual income up to Rs 2.5 lakh is exempt from tax. Those individuals earning a salary between Rs 2.5 lakh and Rs 5 lakh will pay 5 percent tax. Income between Rs 5 and 7.5 lakh will be taxed at 10 percent, while earning of Rs 7.5 and 10 lakh to attract 15 percent tax.
Those earning a salary between Rs 10 and 12.5 lakh will pay tax at the rate of 20 percent, while income between Rs 12.5 and Rs 15 lakh will be liable to pay 25 percent tax. Income above Rs 15 lakh will be taxed at 30 percent.
The new slabs would be for individuals not availing certain specified deductions or exemptions.
While individuals with an annual salary income of Rs 13 lakh and above will pay Rs 1.43 lakh tax under the proposed tax structure; in the old regime, they would have paid a tax of Rs 1.48 lakh, thereby saving Rs 5,200, a source said.
On salary of Rs 14 lakh a year, savings would be Rs 10,400; and for those with income of Rs 15 lakh and above, savings would be Rs 15,600, provided the deductions claimed are up to Rs 2 lakh.In case of non-salary earners, who do not get standard deduction of Rs 50,000, the new tax structure is beneficial for those earning Rs 9.5 lakh annually and availing deductions up to Rs 1.5 lakh. They would save Rs 5,200 in their annual income tax outgoing.