The government on Saturday introduced new tax slabs with reduced rates for an annual income of up to Rs 15 lakh for those foregoing exemptions and deductions under a simplified tax regime.
The new income tax system is optional and a taxpayer can choose to remain in the existing regime with exemptions and deductions, Finance Minister Nirmala Sitharaman said while presenting her second Budget in the Lok Sabha.
It is to be noted that once the option to opt for new tax regime is exercised, it will remain valid for subsequent years.
Sitharaman further said that those earning up to Rs 5 lakh will not pay any tax either in the old regime or in the new regime.
"In order to provide significant relief to the individual taxpayers and to simplify the income-tax law, I propose to bring a new and simplified personal income tax regime wherein income tax rates will be significantly reduced for the individual taxpayers who forgo certain deductions and exemptions," Sitharaman in her Budget Speech.
Under the new tax proposal, people with an annual income of up to Rs 2.5 lakh will not have to pay any tax.
For income between Rs 2.5 lakh to 5 lakh, the tax rate (as earlier) is 5 per cent.
Further, those with an income of Rs 5 lakh to Rs 7.5 lakh will have to pay a reduced tax rate of 10 per cent; between Rs 7.5 lakh and Rs 10 lakh 15 per cent; between Rs 10 lakh and 12.5 lakh 20 per cent; between Rs 12.5 lakh and 15 lakh 25 per cent; and above Rs 15 lakh 30 per cent.
"The new tax regime shall be optional for the taxpayers. An individual who is currently availing more deductions and exemption under the Income Tax Act may choose to avail them and continue to pay tax in the old regime," the minister said.
The proposal would lead to a revenue sacrifice of Rs 40,000 crore per annum, the minister added.
However, Nirmala Sitharaman's new tax slabs has baffled Twitter users. "One thing is clear. Whenever BJP says that it is simplifying something, people should get worried because most of the times BJP ends up complicating things which they want to simplify," a user wrote.
Here is how Twitter reacted:
