In what is being hailed as the Budget for the Middle Class, Finance Minister Nirmala Sitharaman on Wednesday announced significant changes in the direct and indirect tax slabs and proposed a new Income tax regime. The Centre proposed to raise the rebate limit from Rs 5 lakh to Rs 7 lakh in the new tax regime.
However, while the new tax regime would be the default, taxpayers could still opt for the old one and continue filing taxes accordingly. She also said that while the new tax regime would be the default, taxpayers could opt for the old one. Therefore, if an individual has opted for the new tax regime, he or she will not be required to pay any tax up to an annual income of Rs 7 lakh.
While the changes in the taxable income limit are being widely celebrated, especially among the salaried middle class, it cannot be denied that these changes put the central government in the spot and it stands to lose a huge sum.
How much will government lose under the new tax regime?
In her Budget speech in the parliament on Wednesday, FM Nirmala Sitharaman noted India stands to lose around Rs 35,000 crore of net tax revenue after the Union Budget tweaked direct and indirect taxes to provide relief to the middle-income class.
“Revenue of about Rs. 38,000 crore – Rs. 37,000 crores in direct taxes and Rs. 1,000 crores in indirect taxes – will be forgone while revenue of about Rs. 3,000 crores will be additionally mobilized. Thus, the total revenue forgone is about Rs. 35,000 crores annually,” Sitharaman said while delivering the Union Budget for the next fiscal year that starts April 1.
Income tax exemption
As per the new budget, the basic exemption limit from the next financial year will go up to Rs 3 lakh from Rs 2.5 lakh. This apart, a rebate under section 87A has been enhanced under the new tax regime from the current income level of Rs 5 lakh to Rs 7 lakh. Thus, individuals opting for a new income tax regime having income up to Rs 7 lakh will not pay any taxes.
New income tax slabs under the new tax regime are
Rs 0-3 lakh: Nil
Rs 3-6 lakh: 5 per cent
Rs 6-9 lakh: 10 per cent
Rs 9-12 lakh: 15 per cent
Rs 12-15 lakh: 20 per cent
Over Rs 15 lakh: 30 per cent
