Nirmala Sitharaman bats for middle order to revive India’s spend force – The Times of India


On Budget-eve, PM Modi invoked Goddess Lakshmi, and a day later, Indian taxpayers got a Diwali bonus in February. With Finance Minister Nirmala Sitharaman announcing revised tax slabs and rates under the new regime, the biggest bonanza is for those whose income is up to Rs 12 lakh (Rs 12.75 lakh for salaried taxpayers as they get a standard deduction of Rs 75,000) as their liability will become nil under the new proposed income tax regime.However, income such as capital gains are excluded and will be taxed at separate short and long-term rates.
So how did the FM reach this magic zero-tax figure? This was thanks to an increase in tax rebate to Rs 60,000 from the present level of Rs 25,000. Under the new regime, the tax liability on income of Rs 12 lakh and Rs 12.75 lakh for salaried persons is Rs 60,000 which is waived off due to rebate of up to Rs 60,000. Ergo, nil tax.
But what if you earn more than Rs 12 lakh? If your taxable income is even a rupee more, you will not get the benefit of rebate but will have to pay taxes as per slab rates under the new tax regime. But because of a rejig of tax slabs and standard deduction of Rs 75,000 under the new regime, everyone stands to gain. As per the rejig, for people earning over Rs 12 lakh per annum, there will be nil tax for income up to Rs 4 lakh, 5 per cent for income between Rs 4 and 8 lakh, 10 per cent for Rs 8-12 lakh, and 15 per cent for Rs 12-16 lakh. A 20% income-tax will be levied on income between 16 and 20 lakh, 25 per cent on 20-24 lakh and 30 per cent above 24 lakh per annum. How much you save will depend on your income level (see chart). The maximum benefit of Rs 1.1 lakh will accrue at an income level of Rs 24 lakh, where the tax liability under the proposed scheme would be Rs 3 lakh as against Rs 4.1 under the existing new scheme. Beyond the income level of Rs 24 lakh, the tax rates remained unchanged at 30%, so the benefit will remain at Rs 1.1 lakh.

You can save a max of Rs 1.1 Lakh

Earlier, the limit of income for nil tax payment was Rs 7 lakh. By increasing this limit to Rs 12 lakh, around 1 crore assessees who were earlier required to pay tax varying from Rs 20,000 to Rs 80,000 will be now paying nil tax. The provision will cost the exchequer revenue loss of Rs 1 lakh crore.
For those under the old regime – used usually by those who have home loans or HRA deductions – there is no change in either rates or slabs.
To come back to a point that often causes confusion, what happens to those with taxable incomes of just over Rs 12 lakh? In such cases, the taxpayer will get marginal relief to ensure that those earning just over Rs 12 lakh don’t end up with post-tax incomes lower than those earning Rs 12 lakh. For instance, an individual has a taxable income of Rs 12.10 lakh. Without marginal relief, their tax liability would be 61,500 calculated as per tax slabs. However, with marginal relief in place, this taxpayer owes just 10,000. But there’s a cap – marginal relief is only admissible for incomes up to approximately 12.75 lakh. Beyond this, regular tax slabs apply.





Source link

Leave a Reply

Your email address will not be published. Required fields are marked *