New tax regime: Check how much tax you need to pay now

Finance Minister Nirmala Sitharaman presented her seventh consecutive budget on July 23.  The finance minister has made key changes in the income tax slabs while maintaining the income tax rates. The Key changes to the New Income Tax regime, tweaking tax slabs and increasing the standard deduction. The Old Tax Regime remains unchanged.

Our FM gave two announcements to make for those opting for the new tax regime.

1. The standard deduction for salaried employees is proposed to be increased from Rs 50,000 to Rs 75,000.

2. The deduction on family pension for pensioners is proposed to be enhanced from Rs 15,000 to Rs 25,000.

The changes in tax slabs and the increased standard deduction aim to make the new tax regime more attractive.

New Tax Regime after revision

The revised tax slabs under the New Tax Regime are as follows:

Rs 0-3 lakh: Nil (unchanged)
Rs 3-7 lakh: 5% (previously 5% for Rs 3-6 lakh)
Rs 7-10 lakh: 10% (previously 10% for Rs 6-9 lakh)
Rs 10-12 lakh: 15% (previously 15% for Rs 9-12 lakh)
Rs 12-15 lakh: 20% (unchanged)
Above Rs 15 lakh: 30% (unchanged)

Taxpayers in the highest bracket (taxable income of Rs 15 lakh or higher) will benefit from the increased standard deduction, leading to savings of Rs 7,500.

Impact of new income tax changes on different income levels:

1) Annual Income: Rs 7.75 lakh

Standard Deduction: Rs 75,000
Taxable Income: Rs 7 lakh
Tax Calculation:
Tax on income up to Rs 3 lakh: Nil, Tax on income Rs 3-7 lakh: 5% or Rs 20,000, Rebate under Section 87A: Rs 25,000
Total Tax: Nil

2) Annual Income: Rs 10 lakh

Standard Deduction: Rs 75,000
Taxable Income: Rs 9.25 lakh
Tax Calculation:
Tax on Rs 3 lakh: Nil,
Tax on income Rs 3-7 lakh: 5% or Rs 20,000,
Tax on Rs 7-9.25 lakh: 10% or Rs 22,500
Total Tax: Rs 42,500

3) Annual Income: Rs 12 lakh

Standard Deduction: Rs 75,000
Taxable Income: Rs 11.25 lakh
Tax Calculation:
Tax on Rs 3 lakh: Nil,
Tax on income Rs 3-7 lakh: 5% or Rs 20,000,
Tax on Rs 7-10 lakh: 10% or Rs 30,000,
Tax on Rs 10-11.25 lakh: 15% or Rs 18,750
Total Tax: Rs 68,750

4) Annual Income: Rs 20 lakh

Standard Deduction: Rs 75,000
Taxable Income: Rs 19.25 lakh
Tax Calculation:
Tax on Rs 3 lakh: Nil,
Tax on income Rs 3-7 lakh: 5% or Rs 20,000,
Tax on Rs 7-10 lakh: 10% or Rs 30,000,
Tax on Rs 10-12 lakh: 15% or Rs 30,000,
Tax on Rs 12-15 lakh: 20% or Rs 60,000,
Tax on Rs 15-19.25 lakh: 30% or Rs 1,27,500
Total Tax: Rs 2,67,500