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New Tax Regime: Finance Minister Nirmala Sitharaman presented the country's general budget on July 23. The Finance Minister has announced big exemptions under the new tax system. She has increased the standard deduction from Rs 50,000 to Rs 75,000. Changes have also been made in the tax slab.
After this change, now under the new tax system, those earning Rs 7.75 lakh annually will not have to pay a single rupee tax, but if your salary is Rs 10 lakh, then let us know how you can save tax on your entire income and will not have to pay a single rupee tax.
You will not have to pay a single rupee tax on earning 10 lakhs
If you want to save the entire amount on an income of Rs 10 lakh, then you will have to leave the new tax system and opt for the old tax system, in which many types of exemptions will have to be claimed, but if you do not claim tax exemption, then under the old tax system you will have to pay 20 percent tax according to the tax slab. However, if you claim tax exemption, then you can save the entire tax on an income of Rs 10 lakh.
How can you save tax in the old tax regime?
- Under the old tax system, a rebate of up to Rs 50,000 is available as standard deduction. In such a situation, now tax will be levied on Rs 9.50 lakh.
- By investing in schemes like PPF, EPF, ELSS, NSC, you can save tax of Rs 1.5 lakh under section 80C of Income Tax. Now you will have to pay tax on Rs 8 lakh.
- If you invest up to Rs 50,000 annually in the National Pension System (NPS), then under section 80CCD (1B) you are given an additional tax exemption of Rs 50,000. Now if you deduct another Rs 50,000, then tax will be levied on Rs 7.50 lakh.
- If you have also taken a home loan, then you can save up to Rs 2 lakh on its interest under section 24B of Income Tax. If you deduct 2 lakh from 7.50 lakh, then the total taxable income will be 5.50 lakh.
- You can save tax up to Rs 25,000 by taking a medical policy under Income Tax Section 80D. This health insurance should have your name, your wife's name and your children's name. Apart from this, you can get an additional deduction of up to Rs 50,000 by buying health insurance in the name of your parents.
- In such a situation, if you deduct 75 thousand from 5.50 lakh, then the total tax liability will be 4.75 lakh, which will be less than the limit of Rs 5 lakh in the old tax system. This means that you will not have to pay a single rupee tax on an annual income of 10 lakh.
How much tax will have to be paid on an income of Rs 10 lakh in the new tax system?
Even though Finance Minister Nirmala Sitharaman has changed the tax slabs in the new tax system and increased the standard deduction, you will still have to pay tax on income of Rs 10 lakh. You cannot avail tax exemption by investing under the new tax system. In such a situation, let us know how much tax you will have to pay if your income is Rs 10 lakh per annum and you choose the new tax system?
| New tax regime | Revised new tax regime | tax benefits | |
| Income | Rs 10,00000. | Rs 10,00000. | |
| Standard Deduction | Rs 50,000 | Rs 75,000 | |
| taxable income | Rs 950,000 | Rs 925,000 | |
| Total Tax | Rs 52,500 | Rs 42,500 | Rs 10,000 |
From the changes given above in the new tax system, it is clear that if someone's annual income is Rs 10 lakh and he has opted for the new tax system, then he will get a standard deduction of Rs 75,000 instead of Rs 50,000. That is, the total taxable income will be Rs 9 lakh 25 thousand and the tax payment will have to be made only Rs 42,500 instead of Rs 52,500. This means that in the new tax system, those earning Rs 10 lakh annually will now be able to save Rs 10,000 more.
