Salaried class earning upto Rs 12 lakh better off in old I-T regime, says the government

In the proposed personal tax rejig in the budget for 2020-21, however, most of the exemptions have been done away with, including those under 80C

Salaried people with income upto Rs 12 lakh per year with deductions upto Rs 2 lakh, will not benefit from the proposed new tax regime announced in the budget, a government source said on Sunday

However, those earning between Rs 13 lakh and Rs 32 lakh per annum and availing deductions upto Rs 2 lakh could save between Rs 5,000 and Rs 15,600 in taxes in the new regime and hence can benefit more.

Also Read: Income Tax Calculator: New income tax slabs announced; calculate income tax online

The clarification from a top government source came a day after the Budget proposal of Finance Minister Nirmala Sitharaman created confusion and attacked by many economists and political parties.

For the non-salaried such as businessmen and professionals, however, the old regime will be beneficial for if their annual income is upto Rs 7.5 lakh, if they availed a similar deduction.

The existing income tax structure (the old regime) allows a tax payer to avail exemptions for tax benefits. The major exemptions included under various parts of Section 80, under which investments like Public Provident Fund, New Pension Scheme and Equity-linked savings.

The government, however, did not admit till the last minute that the proposed tax regime would hurt the middle and lower middle income taxpayers. Finance Minister Nirmala Sitharaman on Sunday insisted that all those moving into the new regime would benefit and that the trade-off would be more beneficial for the lower income bracket.

It was late Sunday evening that the ministry of finance issued a table, which showed tax payers with salaried income upto Rs 7 lakh per year would have to pay as much as Rs 33,800 in taxes in the new regime, while those earning upto Rs 8 lakh would fork out Rs 46,800. In the old regime, tax payers with a salary of Rs 8 lakh, paid only Rs 33,800 after deduction.

It showed, those earning Rs 32 lakh per annum, paid Rs 7.41 lakh in taxes after the standard deduction in the current regime. However, in the new regime proposed in the budget, they would be required to pay a lesser amount of Rs 7.25 lakh. Thus the savings that accrued to them stood at Rs 15,600.