ITR filing: Check tax rates and slabs under new income tax regime


 







The government in 2020 launched the new income tax regime. While individuals in the old tax regime are eligible to claim deductions such as section 80C, section 80D etc. of the Income-tax Act, 1961 and tax exemptions like house rent allowance, LTC Cash Voucher Scheme etc., they have to forgo the same under the new regime.


However, the new, concessional tax regime offers lower tax rates as compared to the old tax regime. Individuals confused between which tax regime to opt for, musts check are the latest tax rates and slabs applicable under the regime.


Income tax rates and slabs in new tax regime for FY 2021-22




Up to 2,50,000 – Nil


From 2,50,001 to 5,00,000 – 5 per cent


5,00,001 to 7,50,000 – 10 per cent


7,50,001 to 10,00,000 – 15 per cent


10,00,001 to 12,50,000 – 20 per cent


12,50,001 to 15,00,000 – 25 per cent


Above 15,00,000 – 30 per cent


The new tax regime levies the highest 30 per cent tax rate on individuals having income starting from Rs 15,00,001, while it is levied on individuals having income starting from Rs 10,00,001 under the old regime.


However, the new regime will not offer deductions like investments in Employees' Provident Fund (EPF), Public Provident Fund (PPF) etc. or tax exemption on rent paid or food coupons received etc.


The only deduction it offers is the one under section 80CCD (2) of the Income-tax Act, i.e., deduction on the employer's contribution to the Tier-I NPS account. The maximum deduction that can be claimed is 10 per cent of basic salary plus DA in a financial year by an individual.


Which tax regime will suit you?




Despite knowing the tax rates and deductions, individuals can be confused between choosing the right tax regime for them. To make the choice easier, they need to calculate the income tax liability inclusive of cess at 4 per cent under both tax regimes. Whichever tax regime yields the lower number can be preferred.


As per CAs and tax experts, anyone claiming over Rs 2.5 lakh in deductions in a financial year will not gain from switching to the new tax structure.


Things to note mind while opting for new regime




Salaried individuals and pensioners, not having business income, can choose between the new and old tax regimes every financial year. However, if an individual has a business income and chooses the new tax regime in the current FY 2021-22, they will have to pay tax as per the new tax regime for all future financial years.


These individuals do have a once in a lifetime option to switch back to the old tax regime.


A similar perk that both tax regimes offer is a rebate of Rs 12,500 if an individual's income does not exceed Rs 5 lakh in financial year.


The new regime grants no increased basic exemption limit for senior citizens and super senior citizens.


Tax saving in new regime




In new tax regime, an individual can claim deduction under section 80CCD(2) of the Income-tax Act. Deduction under section 80CCD (2) can be claimed if the employer contributes 10 per cent of basic salary to Tier-I NPS account of employee.



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