Income Tax calculation: You can save up to Rs 31,200 under new tax slabs

"An individual who is currently availing more deductions and exemption under the Income-tax Act may choose to avail them and continue to pay tax in the old regime," FM Sitharaman said

Here's an idea how the new income tax rules will affect you

Taxpayers got what they wanted from Union Budget 2020-21. Finance Minister Nirmala Sitharaman announced a "new, simplified tax regime" for individual taxpayers. The new income tax regime comes with lower tax rates. However, around 70 deductions and exemptions, have been withdrawn.

The lower income tax rates will be applicable to incomes in the range of Rs 5 lakh to Rs 15 lakh across four tax slabs. For incomes from Rs 5 lakh to Rs 7.5 lakh, income tax will be levied at a rate of 10 per cent instead of 20 per cent. Individuals earning from Rs 7.5 lakh to Rs 10 lakh will now be taxed at 15 per cent instead of 20 per cent. Tax slabs of Rs 10-12.5 lakh and Rs 12.5-15 lakh, which earlier were taxed at 30 per cent, will now attract income tax at 20 per cent and 25 per cent respectively. No changes have been done for income below Rs 5 lakh and above Rs 15 lakh.

FULL COVERAGE: Union Budget 2020

However, the new tax regime is optional and taxpayers can choose to ignore lower income rates if they want. "An individual who is currently availing more deductions and exemption under the Income-tax Act may choose to avail them and continue to pay tax in the old regime," FM Sitharaman said in her Budget Speech today.

Let's take a look at how much taxpayers at different income levels can save under the new tax regime if they forego exemption under Section 80C, which amounts to Rs 1.5 lakh. These calculations provided by Deloitte have not taken into account other deductions and exemptions associated with income tax, and factoring them in will change the figures mentioned below.

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For income of Rs 7.5 lakh

Individuals earning Rs 7.5 lakh and foregoing exemption of Rs 1.5 lakh under Section 80C will have to pay Rs 5,200 more under the new tax regime, in comparison to when they were not availing this exemption. They still have the option of availing this exemption and paying income tax at earlier rate.

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For income of Rs 10 lakh

Taxpayers earning Rs 10 lakh can save Rs 7,800 on their income tax outgo if they do not avail the exemption under Section 80C.

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For income of Rs 12.5 lakh

Salaried individuals earning Rs 12.5 lakh will have to pay Rs 18,200 less as income tax under the new regime if they forego exemption under Section 80C.