Income Tax Calculator: Know your post-Budget 2020 tax liability as per new income tax slabs

Finance Minister Nirmala Sitharaman, on February 1, proposed significant changes to the country's direct tax regime, proposing two options for paying income tax in fiscal year 2020-21 (FY21), also called assessment year 2021-22 (AY22).

"Currently, the Income Tax Act is riddled with various exemptions and deductions, which make compliance by the taxpayer and administration of the Income Tax Act by the tax authorities a burdensome process. It is almost impossible for a taxpayer to comply with the Income-tax law without taking help from professionals," she said in her Budget speech.

To simplify the process, the FM said announced a new tax regime, which reduces the income tax rate and tweaks the income tax slabs. However, taxpayers can avail of this new structure, which is optional, only if they choose to let go of a majority of exemptions currently offered by the Income Tax Act.

Also Read: FM announces new income tax slabs and rates, tweaks exemption structure

Under the new regime, taxpayers will pay 10%, 15%, 20% and 25% for incomes between Rs 5-7.5 lakh, Rs 7.5-10 lakh, Rs 10-12.5 lakh and Rs 12.5-15 lakh, respectively.

Previously, taxpayers paid 20% for incomes between Rs 5-10 lakh and 30% for incomes between Rs 10-15 lakh.

Also Read: Budget 2020: Should you switch to the new income tax slabs?

However, the fact that taxpayers will have to let go of exemptions if they want to avail of the lower rates means the calculation becomes fairly confusing.

Whether investors would be better or worse off availing of the new income tax regime will depend on whether or not they avail of exemptions in the old structure.

Also Read: Which tax regime? A five-step guide for you to make a choice

Here is an Income Tax Calculator that allows you to do just that: calculate your tax outgo for FY21 for both the old and new tax slabs.

All you need to do is punch in details such as your income and deductions. (Click here if you can't see the calculator below.)

"In order to provide significant relief to the individual taxpayers and to simplify the income-tax law, I propose to bring a new and simplified personal income tax regime wherein income tax rates will be significantly reduced for the individual taxpayers who forgo certain deductions and exemptions," the FM said in the speech.

Also Read: You will likely pay higher taxes if you switch to the new regime

The new personal income tax rates will entail estimated revenue foregone of Rs 40,000 crore per year, she added.

She maintained that the government would continue to rationalise exemptions going forward.