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Impact of proposed new income tax rates on a Rs 15 lakh salary

If an individual earning Rs 15 lakh is wondering which tax structure will be more beneficial, then he/she can figure out the same by calculating the total amount of deductions that he/she is claiming in a financial year.

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Last Updated: Feb 20, 2020, 02.59 PM IST
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Salaried individual claiming total deductions of Rs 2.5 lakh would be liable to pay the same amount of tax in both tax regimes.
According to Budget 2020 proposals, if an individual opts for the new tax regime then his/her income will be taxed at the new lower income tax rates but he/she will have to forgo the most commonly availed deductions such as deduction under section 80C for maximum of Rs 1.5 lakh, standard deduction of Rs 50,000 etc.

If an individual earning Rs 15 lakh is wondering which tax structure will be more beneficial, then he/she can figure out the same by calculating the total amount of deductions that he/she is claiming in a financial year.

If you are a salaried individual earning an annual income of Rs 15 lakh, the table below shows you the total amount of deductions and exemptions you will have to claim so that your tax liability is the same in both tax regimes.
Particulars

Tax payable in Existing Regime

Tax payable inNew Regime

Basic Salary + DA

7,77,200

7,77,200

Other Taxable Allowances

7,22,800

7,22,800

Gross Salary

15,00,000

15,00,000

Standard Deduction

-50,000

-

Income under the head salary

14,50,000

15,00,000

Chapter VIA deductions

-2,00,000

-

Income under the head salary

12,50,000

15,00,000

Income Tax (Rebate u/s 87A is NIL)

1,87,500

1,87,500

Cess @ 4%

7,500

7,500

Total tax, surcharge and education cess

1,95,000

1,95,000

Source: EY India; (Amount in Rs.)

As shown in the table above, a salaried individual having income of Rs 15 lakh if claiming total deductions of Rs 2.5 lakh would be liable to pay the same amount of tax in both tax regimes.

If the total deduction claimed by you is less than Rs 2.5 lakh, then you will be better off opting for the new tax regime. On the other hand, if the total deductions and tax-exemptions claimed by you is equal to or more than Rs 2.5 lakh, then you are better off continuing with the existing tax regime.

In other words, don't switch to the new tax regime if your income is at Rs 15 lakh and the tax-exemptions and deductions claimed by you are equivalent to or exceed Rs 2.5 lakh in a financial year.

In the above table, the total of Rs 2.5 lakh is arrived at by taking into account standard deduction of Rs 50,000 (available to an individual having income from salary) and other various deductions that a taxpayer can claim provided he/she is eligible. These can be: deductions under section 80C for maximum of Rs 1.5 lakh by investing in specified financial instruments, under section 80D for health insurance premium paid for self, spouse, dependent children and parents, under section 80TTA for maximum up to Rs 10,000 on the interest received from savings account held with bank and/or post office, under 80TTB for senior citizens for the interest received from bank and/or post office etc.
Click here for all the information and analysis you need for tax-saving this financial year

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