This time a big relief has been given to the taxpayers in the budget. The Finance Minister said in the Parliament that now those earning less than 7 lakhs will not have to pay any income tax.
However, this benefit will be available only to those opting for the new tax regime. The Finance Minister has raised the income tax exemption limit to Rs 7 lakh in the new tax regime, which was earlier Rs 5 lakh. While under the old tax regime, income up to Rs 2.5 lakh was tax free.
However, in the old tax regime, there is a provision for Standard Deduction and many exemptions in other items. These benefits were not given in the new tax regime. But this time standard deduction has also been included in the new tax system. A taxpayer can claim up to Rs 50,000 for standard deduction, while every salaried individual with an income of Rs 15.5 lakh or more is entitled to Rs 52,500 as standard deduction. Under the new tax regime, the basic exemption limit has been increased to Rs 3 lakh.
What is standard deduction?
Standard deduction is the deduction that is deducted from the income of the income tax payer and after that tax is calculated on the remaining income. Salaried employees and pensioners are already getting the facility to avail tax exemption through standard deduction. Suppose the annual income of a person doing a job is Rs 8 lakh. In such a situation, if the benefit of standard deduction up to Rs 50,000 is available in the total package, then their tax will be calculated on Rs 7,50,000 instead of Rs 8 lakh.
Standard deduction was introduced in the budget of the year 2018. Earlier its limit was Rs 40,000, which was increased to Rs 50,000 the next year. The purpose of starting this is to give more money to the employees by giving them tax exemption.
Who can avail it Standard deduction can be availed by salaried employees and pensioners who have not opted for the new tax rules. There is a provision of lower tax rate in the new rules. Apart from this, pensioners taking pension are also entitled to get this deduction. But standard deduction is not available on family pension. This means that if any of his dependents is taking family pension after the death of an employee, then he is not entitled to this deduction or exemption.
No effect of change of job
Change of job has no effect on standard deduction exemption. Total salary here includes all the components of salary paid by the employer and all the taxable portion of all allowances and perks. Even if an employee changes his job during the year, he is entitled to get the benefit of standard deduction.
Income tax slabs
The number of income tax slabs has been reduced to 5. Announcing the new tax slab on personal income, Sitharaman said that those earning Rs 3 to 6 lakh annually will have to pay 5% tax. The rate of income tax will be 10% on income of 6 to 9 lakh rupees. Rs 9 lakh to Rs 12 lakh will be taxed at 15%, Rs 12 lakh to Rs 15 lakh at 20% and income above Rs 15 lakh will be taxed at 30%.
