Finance Minister Nirmala Sitharaman in her second Budget presented on February 1, proposed a new tax regime that has lower tax slabs rates than the current slab rates. However, the new slab rates are optional and anyone opting for the new tax regime has to sacrifice around 70 deductions, she said
In the current tax regime, income up to Rs 2.5 lakh is exempt from tax while income between Rs 2.5 lakh and Rs 5 lakh is taxed at 5%. 20% tax is imposed on income over Rs 5 lakh to Rs 10 lakh and 30% is imposed on income above Rs 10 lakh.
But the new tax regime has 7 slabs — 0% tax on income up to Rs 2.5 lakh, 5% tax on income between Rs 2.5 lakh and Rs 5 lakh, 10% tax on income between Rs 5 lakh and Rs 7.5 lakh, 15% on income over Rs 7.5 lakh and less than Rs 10 lakh, 20% on income above Rs 10 lakh to Rs 12.5 lakh, 25% on income over Rs 12.5 lakh to Rs 15 lakh and 30% on income above Rs 15 lakh.
The new tax regime will be beneficial to those who do not claim deductions under popular sections like Section 80C, house rent allowance, Section 24B, which pertains to deduction on home loan interest payment. These popular deductions will not be available in the new tax regime.
Here is a list of deductions taxpayers can still claim while opting for the new tax regime:
1) Sec 80CCD(2)- Employer’s contribution to pension scheme of Central Government (NPS and EPF). However, according to the budget proposal, employers’ contribution to EPF, NPS and other superannuation funds above Rs 7.5 lakh in a financial year will be taxable in the hands of an employee.
2) Sec 24- deduction for interest paid on home loan on rented out properties
3) Sec 10(10)- Death–cum-retirement gratuity received
4) Sec 10(10A)- Commuted value of pension received
5) Sec 10(10AA)- Earned leave encashment on retirement
6) Sec 10(10B)(i)- Retrenchment Compensation received in respect of schemes not approved
7) Sec 10(10B)(ii)- Retrenchment Compensation received in respect of an approved scheme
8) Sec 10(10C)- Amount received/receivable on voluntary retirement or termination of service
9) Sec 10(10CC)- Tax paid by employer on non-monetary perquisite
10) Sec 10(6)- Remuneration received as an official of an Embassy, High Commission etc…Read more>>