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

    Synopsis

    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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    Salaried individual claiming total deductions of Rs 2.5 lakh would be liable to pay the same amount of tax in both tax regimes.
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    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.
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    3 Comments on this Story

    vidya k245 days ago
    The new tax regime concept is useless . There is no relief. you cannot glorify taxes in any form and make them look lucrative . Utter disappointment
    Alvin Jose330 days ago
    What about HRA?
    amish330 days ago
    This is just madness. instead of giving any benefit in current tax regime which can give more money in hand of taxpayers they have diverted attention by new text regime which is useless for good earners.
    This govt is just attacking on salary class who are earning white income. evry year they are adding burden of tax on salaried class. its just creating frustration and panic.
    First they add
    1)LTCG
    2)Increase in Cess
    3)Increase in surcharge
    4)GST Service tax from 12 to 18%
    5)DDT will be now 30% who are earning more than 10 Lakh
    6)limiting PPF and NPS
    7)Reduced rate of interest
    More and more people now playing safe game as tax burden is increasing and avoiding spending.
    On other side it can not do anything who are earning in black. Business class,professional still hardly pay any tax and enjoys all benefit.
    Black money is dead money which does not rotate in economy and who are earning in white govt is just killing them.
    Overall economy will suffer a lot.
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