39th Edition | The Revised Tax Regime in India: An In-Depth Analysis

Introduction

Union Finance Minister Nirmala Sitharaman, in her seventh presentation of the Budget, has brought about significant changes in the Direct Income Tax rates under the new regime. These revisions aim to simplify the tax structure and provide relief to the middle and higher-income groups. This article will explore the revised tax rates, the implications for taxpayers, and the unchanged rates under the old regime, offering a comprehensive understanding of the new fiscal landscape.

Revised Direct Income Tax Rates

The new tax regime now offers a more streamlined set of income brackets and corresponding tax rates. The revised rates are as follows:

• Income up to ₹3 Lakhs: Nil tax
• Income from ₹3 Lakhs to ₹7 Lakhs: 5% tax
• Income from ₹7 Lakhs to ₹10 Lakhs: 10% tax
• Income from ₹10 Lakhs to ₹12 Lakhs: 15% tax
• Income from ₹12 Lakhs to ₹15 Lakhs: 20% tax
• Income above ₹15 Lakhs: 30% tax

Comparatively, the previous rates under the new regime were:

• Income up to ₹3 Lakhs: Nil tax
• Income from ₹3 Lakhs to ₹6 Lakhs: 5% tax
• Income from ₹6 Lakhs to ₹9 Lakhs: 10% tax
• Income from ₹9 Lakhs to ₹12 Lakhs: 15% tax
• Income from ₹12 Lakhs to ₹15 Lakhs: 20% tax
• Income above ₹15 Lakhs: 30% tax

Enhanced Standard Deduction

Another notable change is the enhancement of the Standard Deduction under the new tax regime. The Standard Deduction has been increased from ₹50,000 to ₹75,000, providing additional relief to salaried individuals.

Implications for Taxpayers

The revised tax rates and enhanced Standard Deduction bring about specific benefits for different income groups. The following are the estimated tax benefits for salaried individuals:

• For those earning above ₹8 Lakhs: An approximate tax benefit of ₹5,200
• For those earning ₹15 Lakhs and above: An approximate tax benefit of ₹17,500

Unchanged Old Tax Regime

It is crucial to note that the tax rates under the old regime remain unchanged, preserving the traditional structure for taxpayers who prefer it. The old tax regime rates are as follows:

• Income up to ₹2.5 Lakhs: Nil tax
• Income from ₹2.5 Lakhs to ₹5 Lakhs: 5% tax
• Income from ₹5 Lakhs to ₹10 Lakhs: 20% tax
• Income above ₹10 Lakhs: 30% tax

Tax Re-assessment Changes

In addition to the revisions in tax rates, the Finance Minister announced changes in the tax re-assessment procedure. Re-assessment can now only be initiated after three years if the escaped income exceeds ₹50 Lakhs. This change aims to reduce the frequency of re-assessments and provide a sense of stability to taxpayers.

Conclusion

The revisions in the Direct Income Tax rates and enhancements in the Standard Deduction under the new regime represent a significant shift in India's fiscal policy. These changes are designed to simplify the tax structure and provide substantial relief to middle and high-income earners. As taxpayers navigate these changes, understanding the new and old regimes' nuances will be crucial for optimal tax planning and compliance.