Lagatar24 Desk
New Delhi, Feb 1: The annual rebate limit for individual taxpayers has increased from 5 lakh to 7 lakh rupees by Finance Minister Nirmala Sitharaman on Wednesday. She also announced new tax slabs and did away with the previous twin-structure system, which taxed citizens at a rate of under 25% without exemptions and under 30% with exemptions permitted and was unboxed in 2020.
The new slabs are:
Rs 0-3 lakh – no tax
Rs 3-6 lakh – taxed at 5 per cent
Rs 6-9 lakh – taxed at 10 per cent
Rs 9-12 lakh – taxed at 15 per cent
Rs 12-15 lakh- taxed at 20 per cent
Above Rs 15 lakh – taxed at 30 per cent
“I had introduced, in the year 2020, the new personal income tax regime with six income slabs starting from Rs 2.5 lakh. I propose to change the tax structure in this regime by reducing the number of slabs to five and increasing the tax exemption limit to Rs 3 lakh,” she said.
Individual taxpayers were offered the choice in Budget 2020 between continuing with the previous rate, under which they could still claim tax exemptions, or choosing the lower new rate, which would have prevented them from claiming exemptions.
For those whose income was over 15 lakh rupees per year, the former tax system imposed a 30% tax rate, however they were eligible for exemptions.
People who chose the new system, which was first announced in 2020, and had an income over 15 lakh were subject to a 25% tax rate, however they were not eligible for exemptions.
In the meantime, the govt has suggested that the maximum surcharge rate in the new tax system be lowered from 37% to 25%.
Finance Minister Nirmala Sitharaman discussed the losses the Centre will bear in order to facilitate the new tax system when describing it.
“India will lose Rs 35,000 crore of net tax revenue to provide relief to the middle-income group. “Revenue of about Rs 38,000 crore Rs. 37,000 crore in direct taxes and Rs 1,000 crore in indirect taxes will be forgone while revenue of about Rs 3,000 crore will be additionally mobilized. Thus, the total revenue forgone is about Rs 35,000 crore annually,” she said.
Notably, the Finance Minister did not announce any change in income tax slabs in the last Budget.
