Big relief for middle class, no tax on income up to Rs 7 lakh

Currently, those with an income of Rs 5 lakhs do not pay any income tax and I proposed to increase the rebate to Rs 7 lakhs.

New Delhi, Feb 01: Union Finance Minister Nirmala Sitharaman on Wednesday announced that income tax rebate limit increased to Rs 7 lakh in new tax regime.

The deductions limit 80C currently stood at Rs 1.5 lakh. Section 80C is a tax saving option under the Income Tax Act which has proved to benefit taxpayers. It enables them to limit their taxable income by leveraging tax saving instruments.

"Currently, those with an income of Rs 5 lakhs do not pay any income tax and I proposed to increase the rebate limit to Rs 7 lakhs in the new tax regime," announced Nirmala Sitharaman.

While announcing personal tax rebates, Sitharaman said that "Tax for income of Rs 0-Rs 3 lakh is nil, for income above Rs 3 lakh and up to Rs 5 lakh will be taxed at 5 per cent, for income of above Rs 6 lakh and up to Rs 9 lakh will be taxed at 10 per cent and for income above Rs 12 lakh and up to Rs 15 lakh to be taxed at 20 per cent and above 15 lakh at Rs 30 per cent."

Sitharaman proposed to increase the rebate limit to Rs.7 lakh in the new tax regime, which would mean that the persons in the new tax regime, with income up to Rs. 7 lakh will not have to pay any tax. Currently, those with income up to Rs. 5 lakh do not pay any income tax in both old and new tax regimes.

Providing relief to middle-class individuals, she proposed a change in the tax structure in the new personal income tax regime by reducing the number of slabs to five and increasing the tax exemption limit to Rs. 3 lakh.

This will provide major relief to all tax payers in the new regime. An individual with an annual income of Rs. 9 lakh will be required to pay only Rs. 45,000/-. This is only 5 per cent of his or her income. It is a reduction of 25 per cent on what he or she is required to pay now, i.e. Rs. 60,000/-. Similarly, an individual with an income of Rs. 15 lakh would be required to pay only Rs. 1.5 lakh or 10 per cent of his or her income, a reduction of 20 per cent from the existing liability of Rs. 1,87,500.

The New Income Tax Rates

Rs 0-3 Lakhs - Nil
Rs 3-6 Lakhs - 5%
Rs 6-9 Lakhs - 10%
Rs 9-12 Lakhs - 15%
Rs 12-15 Lakhs - 20%
Above Rs 15 Lakhs - 30%