The New Income Tax System introduced in the budget, definitely has a lot more income tax slabs in addition to low tax rates in contrast to the Old System, for the income up to 15 lakhs, however, there aren’t any deduction benefits. Note that the old tax system has not been eliminated and a taxpayer will have the choice of selecting between the two tax systems.
There are 4 slabs in the Old Income Tax system:
Upto Rs. 250,000: No tax
Between Rs.250,001 – Rs.500,000: 5 percent
Between Rs.500,001 – Rs.10,00,000: 20 percent
Above Rs.10 lakhs: 30 percent
There are 7 slabs under the New Income Tax System:
Upto Rs 250,000: No Tax
Between Rs.250,001 – Rs.500,000: 5 percent
Between Rs.500,001 – Rs.750,000: 10 percent
Between Rs.750,001 – Rs.10,00,000: 15 percent
Between Rs.10,00,001 – Rs.12,50,000: 20 percent
Between Rs.12,50,001 – Rs.15,00,000: 25 percent
Above Rs.15 lakhs: 30 percent
In the first Budget proposed by Sitharaman, electric vehicles as well as affordable houses were promoted with a few new deductions pertaining to the interest being paid on home loans and auto loans, subject to a few conditions. U/s 80EEA, an extra deduction on the interest of home loan paid upto Rs.150,000 to buy an affordable house having a value of upto Rs.45 lakhs, had been announced, in addition to the existing deduction limit u/s 24 upto Rs.2 lakhs. However, the condition being the assessee is not owning residential house property as on the loan sanction date by the financial institution, between the period April 1, 2019 – March 31, 2020.
Furthermore, u/s 80EEB, a deduction of upto Rs.1.5 lakh towards on the interest paid on auto loan to purchase an electric vehicle has been announced. However, the loan should be sanctioned between April 1, 2019 – March 31, 2023. Also, the assessee must not own any other electric vehicle as on the loan sanction date of the financial institution/NBFC. Apart from these new sections, the existing deductions are also available and a normal salaried taxpayer can avail deductions amounting to Rs.825,000
Before you opt for the new tax system, you can make use of the tax calculator to understand the tax payable under both the systems and decide on the tax system that you intend to follow.
