Finance Minister Nirmala Sitharaman has announced reforms to the income tax structure, aimed at benefiting taxpayers across the country. The new tax regime introduces a more streamlined and taxpayer-friendly approach:
Income Tax Slabs Under New Scheme:
o Up to ₹3 Lakhs: No tax
o ₹3 Lakhs to ₹7 Lakhs: 5%
o ₹7 Lakhs to ₹10 Lakhs: 10%
o ₹10 Lakhs to ₹12 Lakhs: 15%
o ₹12 Lakhs to ₹15 Lakhs: 20%
o Above ₹15 Lakhs: 30%
In addition to these new slabs, the standard deduction limit has been increased from ₹50,000 to ₹75,000. The deduction for family pensions has also been raised from ₹15,000 to ₹25,000. According to the Finance Minister, these changes will benefit approximately 4 crore salaried individuals and pensioners, offering a potential income tax benefit of ₹17,500 for those who adopt the new scheme.
For those opting to stay with the old tax regime, the current tax slabs will remain unchanged. However, the new system offers a more simplified approach for those looking to benefit from the updated deductions and lower tax rates.
Additional Reforms:
- Tax Deduction Limit for Employer’s NPS Contributions: Increased from 10% to 14% for employees of private firms. Note that this increase does not apply to employee contributions.
- Corporate Tax Rate: Reduced to 35% for foreign companies.
- Long-Term Capital Gains Tax: Increased to 12.5% for financial and non-financial assets.
The Finance Minister also announced a comprehensive revision of the Income Tax Act, 1961, aimed at reducing litigation and complaints. This revision is expected to be completed within six months, marking a significant overhaul of the existing tax laws.
These reforms are anticipated to simplify tax compliance, provide relief to taxpayers, and enhance the attractiveness of India as an investment destination.
