New income tax scheme will help 2/3rd taxpayers save more money

New Income tax Scheme

Union Finance Minister Ms. Niramala Sitharaman in her budget speech stated that the New Tax Regime (NTR) will help taxpayers have more money in their hands than before. The NTR does away with 70 of the 120 deductions which were in the erstwhile tax regime. It was said that the old tax regime in a way forced taxpayers to save more money for curtailing their tax liability. 

The revenue secretary Mr. Ajay Bhusan also applauded the NTR and said that he has data analytics to support his zeal for the new tax structure. Basing his statement on analysis of the tax database for 2018-19, Mr. Ajay said that about 69% of taxpayers will be able to save up to Rs. 78,000 by opting for the NTR. The analysis showed that only 0.6% of the 57.8 million taxpayers had claimed deductions and exemptions over Rs. 4lakh, while only 8.4% could claim over 2 lakh!

What is NTR?

Ms. Sitharaman in budget 2020 presented the NTR, which has a lower rate of tax deductions. In NTR the rate of tax has been revised to a lower corresponding value, up to an annual income of 15 lakh. For income falling in slab Rs. 5 lakh to Rs. 7.5 lakh, the rate has been reduced from the current 20% to 10%. Similarly, the taxpayers falling in annual income slab of Rs. 7.5 lakh to Rs. 10 lakh will be taxed at the revised rate of 15%, as against the old rate of 20%. Also, the tax liability for the income group of Rs. 10 lakh to Rs. 12.5 lakh has been cut down to 20% from 30%. The tax rate for income group 12.5 lakh to Rs. 15 lakh has been cut down to 25% from 30%.

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