Indian Union Finance Minister Nirmala Sitharaman on Wednesday announced an increase in the income tax rebate limit from Rs500,000 to Rs700,000 stating that the new tax regime will now be the default tax regime.
The Finance Minister also proposed to change the tax structure in this regime by reducing the number of tax slabs to 5 and increasing the tax exemption limit to Rs300,000.
On personal income tax, the FM announced that "Tax for income of Rs0-Rs300,000 is nil, for income above Rs300,000 and up to Rs500,000 will be taxed at 5 per cent, for income of above Rs600,000 and up to Rs900,000 will be taxed at 10 per cent and for income above Rs1.2 million and up to Rs1.5 million to be taxed at 20 per cent and above Rs1.5 million at 30 per cent."
For pensioners, the finance minister announced extending the benefit of standard deduction to new tax regime. Each salaried person with an income of Rs1.55 million or more will benefit by Rs52,500.
Sitharaman, while presenting the Union Budget in Parliament today said, "A person earning Rs900,000 a year will now be paying just Rs45,000 instead of Rs60,000 currently. Similarly, a person earning Rs1.5 million will now pay only 10 per cent of this as tax."
The finance minister also said: "The limit of Rs300,000 for tax exemption on leave encashment on government salaried employees. That was set in 2002 when government salaries were lower and is now being raised to Rs2.5 million."
She also added, "The new income tax regime will now become the default option, but people will still have the option to go for earlier regime."
The average processing time for income tax returns has been reduced from 93 days to 16 days.
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