Naveen Kumar, 36, of Rohtak, was looking to select a new income tax slab. Kovid is unable to do this, but he wants to know which is better in two slabs. When a new slab of income tax was announced in the budget, which is a new slab of 5, 10, 15, 20, 25, and 30 percent as an extension of the existing 5 percent, 20 percent, and 30 percent slab, it was welcomed Happened. People felt that their income tax would be reduced in the new slab.
Income Tax Slab (Rs) Tax Rate (Old Arrangement) Tax Rate (New Arrangement)
Up to 2.5 lakhs nothing
2.5 to 5 lakh 5% 5%
5 to 7.5 lakh 20% 10%
7.5 to 10 lakhs 20% 15%
10 to 12.5 lakh 30% 20%
12 to 15 lakhs 30% 25%
15 lakhs 30% 30%
What is the new income tax slab?
The new slab seems to be reducing the burden of income taxpayers. It is optional. That is, you can choose it or stay in the old slab. But if you choose a new slab, you will have to give up all the exemptions and deductions available under the Income Tax Act, 1961. Which slab is better? The new system has more tax slabs, so it sounds better, especially when the annual income is less than 1.5 million. But choosing this will deprive you of discounts and deductions. You will have to be exempted from tax exemptions under Section 80C, 80CC, 80CD, 80D, 80DD, and 80E along with handwashing of LTA (Leave Travel Allowance), HRA (House Rent Allowance), etc.
The standard deduction of 50,000 under section 16 and the deduction on interest on home loan under section 24 (b) will also become invalid. However, the only deduction under Section 80 CCD (2), which is the contribution of the employer to the employees' accounts under the Notified Pension Scheme, can be claimed. About 70 rebates and deductions have been removed in the new slab. Once selected, it will not be returned to the old slab.
For many income taxpayers, tax savings are the only savings available under Section 80C. There is an argument of saving more in the new slab, but if there is no habit of saving, it will be fatal to lose tax savings. For those with an annual income of Rs 15 lakh or less, the new slab will be better than the old one, but considering the discounts and deductions, the old structure will prove effective. For example, the tax in the new slab will be Rs 39,000 as compared to Rs 65,000 in the old slab on an annual income of 7.5 lakh, but if you take a standard deduction of 50,000, tax savings of 1.5 lakh under 80C and a deduction of 20,000 under 80D If you claim, then the tax will be Rs 19,240, which means tax savings of Rs 45,760. Therefore, Naveen should move from old to the new slab by thinking carefully.