A new tax regime with reduced income tax rates was introduced in the Budget 2020. However, the reduction in rates was only for those who would forego their exemptions. People who wish to include the exemptions can stick to the old tax regime. Meanwhile, the Govt has kept cess and surcharge the same.

Here is the new income tax slab vs old income tax slab-

Tax Slab Old Tax Regime New Tax Regime
Up to Rs. 2,50,000 Nil Nil
From Rs. 2,50,000 - 5,00,000        5% 5%
From Rs. 5,00,000 - 7,50,000     20% 10%
From Rs. 7,50,000 - 10,00,000     20% 15%
From Rs. 10,00,000 - 12,50,000    30% 20%
From Rs. 12,50,000 - 15,00,000   30% 25%
Above Rs. 15,00,000   30% 30%


In the old as well as the new regime, age was classified in 3 different categories. However, the exemption limit is different in both the regimes-

Age New Regime Exemption Limit Old Regime Exemption Limit
People Below 60 Years of Age Rs. 2,50,000 Rs. 2,50,000
People Between 60 to 80 Years of Age Rs. 2,50,000 Rs. 3,00,000
People Above 80 Years of Age Rs. 2,50,000               Rs. 5,00,000              


If people between 60 to 80 years of age and people above 80 years of age pick the new regime, then they will have to pay tax as per the new tax exemption limit.

Here are some examples of how much tax a person must pay in the old and new regime without any exemptions for the same salary.

A person with an annual income of Rs. 7,50,000 -

Salary Old Regime Tax Rate Old Regime Tax Amount New Regime Tax rate New Regime Tax Amount
Up to Rs. 2,50,000  0% 0 0% 0
From Rs. 2,50,000 - 5,00,000   5% Rs. 12,500 5% Rs. 12,500
From Rs. 5,00,000 - 7,50,000   20% Rs. 50,000 10% Rs. 25,000
Total Tax Rs. 62,500 Rs. 37,500
Cess 4% Rs. 2,500 4% Rs. 1,500
Annual tax payable Rs. 65,000 Rs. 39,000


However, if the person earning Rs. 7,50,000 files for some exemptions, the tax amount will change accordingly-

Deduction Deduction Amount Old Regime Tax Amount with Exemptions New Regime Tax Amount
Standard Deduction Rs. 50,000
Section 80C Deduction            Rs.1,50,000          
Section 80D Deduction Rs. 20,000
Net Taxable Amount    Rs. 5,30,000    Rs. 7,50,000
Total Tax Rs. 18,500 Rs. 37,500
Cess 4% Rs. 740      Rs. 1,500  
Net Tax Payable (annually) Rs.19,240  Rs. 39,000


A person with an annual income of Rs. 10,00,000

Salary Old Regime Tax Rate Old Regime Tax Amount New Regime Tax rate New Regime Tax Amount
Up to Rs. 2,50,000   0% 0 0% 0
Rs. 2,50,000 to Rs. 5,00,000 5% Rs. 12,500    5% Rs. 12,500
Rs. 5,00,000 to Rs. 7,50,000 20% Rs. 50,000    10% Rs. 25,000
Rs. 7,50,000 to Rs. 10,00,000 20% Rs. 50,000    15% Rs. 37,500
Total Tax Rs. 1,12,500 Rs. 75,000
Cess 4% Rs. 4,500      4% Rs. 3,000  
Annual Tax Payable Rs. 1,17,000 Rs. 78,000


A person earning an annual income of Rs. 10,00,000 and files for exemption-

Deduction Deduction Amount Old Regime Tax Amount with Exemptions New Regime Tax Amount
Standard Deduction Rs. 50,000
Section 80C Deduction   Rs.1,50,000
Section 80D Deduction Rs. 20,000
Net Taxable Amount    Rs. 7,80,000     Rs. 10,00,000
Total Tax Rs. 68,500 Rs. 75,000
Cess 4% Rs. 2,740   Rs. 3000   
Net Tax Payable (annually) Rs. 71,240 Rs. 78,000


The taxpayer can pick between the old regime and the new regime, as per the convenience and benefit received. However, people filing for multiple deductions might not find the new tax regime beneficial to them as they have to pay more tax. It is important for every person to know which income tax slab rates will help them save money.

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DISCLAIMER

The information contained herein is generic in nature and is meant for educational purposes only. Nothing here is to be construed as an investment or financial or taxation advice nor to be considered as an invitation or solicitation or advertisement for any financial product. Readers are advised to exercise discretion and should seek independent professional advice prior to making any investment decision in relation to any financial product. Aditya Birla Capital Group is not liable for any decision arising out of the use of this information.



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