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New Tax Slab 2022: Everything you need to know

New tax Slab 2022: Everything you need to know about the new tax slab 

Income tax is imposed on the income-earning groups such as individuals, HUF, partnership firms, LLPs, and corporates as per the Income-Tax Act of India. Income tax levied on individuals is as per the tax slab system; if an individual’s income is above the minimum threshold limit, tax is to be paid accordingly. 

Tax Slab Rate

As per the tax slab system, different tax rates are imposed by the Indian Income-tax department for different ranges of income. It means the rate of tax increases with an increase in the payer’s income. The income tax slab is decided every year to enable progressive and fair taxation. Therefore, every taxpayer has a different tax slab rate. Income-tax is categorized based on individual taxpayers such as:

  • Individuals (aged below 60 years), including residents and non-residents
  • Resident Senior citizens (60 to 80 years)
  • Resident Super senior citizens (above 80 years)

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SR No.

Income tax slabs

Income tax applicable to each slab

1.

Up to 2.5 lakhs

Nil

 

2.

Rs 250001 – 500000

5% of (Total income minus Rs 2,50,000)

 

3.

Rs 500001 – 1000000

Rs 12,500 + 20% of (Total income minus Rs 5,00,000)

 

4.

Above Rs 100000

Rs 1,12,500 + 30% of (Total income minus Rs 10,00,000)

 

According to the new tax regime, you will have to waive any tax benefits you may receive under sections 80C and 80D of the ITA. You won’t be able to take advantage of the same tax deductions by investing in PF, NPS, ELSS and life insurance plans, among others. Section 80D’s deductions for health insurance premiums, housing benefits, travel allowances, and more will not be available.

Under the old tax system, people over 60 years old do not have to pay income tax up to ₹3 lakh. This exemption limit is higher for super seniors, i.e. it is 550,000 for people over 80 years of age. If an elderly or super older person chooses a new tax payment system, the tax exemption limit will be uniform for all age groups at ₹2.5 lakhs. Therefore, a tax refund of Rs 12,500 is available to those whose taxable net income does not exceed Rs 50,000.

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Allowable deductions under the new tax regime

You can only claim the following deductions under the new regime, and you cannot claim other tax deductions that already existed under the old tax regime.

  1. Disability travel allowance
  2. Travel allowance
  3. Section 80CCD (NPS) deduction
  4. Section 80DJJY (using new employees)
  5. Section 32 depreciation minus additional depreciation.

Part 80CCD Deductions (NPS) 

Part 80CCD provides tax deductions for taxpayers who have contributed to the National Retirement Program (NPS) as well as employer contributions move for similar reasons.

Section 80CCD (1): This section deals with the assessment of granting of a tax deduction, whether it is the government, other employers, or self-employed taxpayers. Deductibles are limited to a maximum of 10% of wages (subsistence allowance only) for employees and 10% of gross income for self-employed taxpayers. The deduction limit should not exceed Rs 2 lakh in a financial year.

Section 80CCD (2): This particular section deals with the employer’s contribution to the employee’s NPS fund. The employee may claim this amount as a deduction under Section 80CCD (2). The deduction is limited to 10% of the employee’s salary.

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Section 80JJAA (new employment deduction): Deductible for assessors whose gross income includes business income and is subject to section.

Who should choose a new tax mode? 

It is not necessary to choose a new tax regime. However, you can also select a new tax regime if it is in your favour. Now let’s take a look at the different ones to see which one suits your needs.

The new tax regime would be better if your income is up to Rs 15lakhs. For income levels above Rs 15,000,000, the old tax system is most suitable.

For seniors with a taxable income of Rs 3,00,000, the old tax regime is a suitable choice as the basic exemption limit is Rs 3,00,000 compared to Rs 2,50,000 under the new tax regime.

For super elderly citizens with a taxable income of Rs 5,00,000, the old tax regime is a suitable option as the basic exemption limit is Rs 5,00,000 compared to the Rs 2,5000 set updated according to the statutory tax rate.

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Conclusion

Therefore, for the fiscal year 2019-20, taxpayers will be able to benefit from deductions and exemptions in a similar manner. When filing your taxes for the 2019-20 fiscal year, you must plan your taxes and invest in tools that will help you build wealth and save money on taxes.

Edited by Prakriti Arora

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