Big Bang Changes In Income Tax Rates: Finance Minister Introduces New Regime With Significantly Lower Rates

Nirmala Sitharaman during her budget speech announced big bang changes in the direct tax regime.

Under the new regime an individual taxpayer will be required 10 per cent for 5 lakh to 7.5 lakh as opposed to the current rate of 20 per cent if he or she agrees to forego exemptions.

In case of income from Rs 7.5 lakh to Rs 10 lakh the taxpayer will be required to pay 15 per cent under the simplified regime.

In case of Rs 10 lakh to Rs 12.5 lakh, taxpayers will be required to pay Rs 20 per cent instead of the current 30 per cent. In case of Rs 12.5 lakh to Rs 15 lakh a tax rate of Rs 25 per cent will be in force.

There will be no income tax charged till the income of Rs 5 lakh and a 30 per cent rate will be charged for those earning over Rs 15 lakh.

It should be noted that two regimes now will be in force - old and new. Under the old regime, the rates of 20 per cent for Rs 5 lakh and Rs 10 lakh and 30 per cent for Rs 10 lakh and above will continue and taxpayers would be allowed to take exemptions.

The concept of exemptions would be eliminated in the new simplified tax regime so that tax payers find it easier to file the returns.