New Tax Regime: After the change in standard deduction, now under the New Tax Regime, those earning Rs 7.75 lakh annually will not have to pay even a single rupee tax, but if your income is Rs 10 lakh, then let us know how you can save tax on your entire income.
New Tax Regime: Finance Minister Nirmala Sitharaman presented the country’s general budget on 23 July. The Finance Minister has announced a big exemption under the New Tax Regime. She has increased the Standard Deduction from Rs 50,000 to Rs 75,000. The tax slab has also been changed.
After this change, now under the New Tax Regime, those earning Rs 7.75 lakh annually will not have to pay even 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 earning 10 lakh rupees, then you will have to leave the new tax regime and choose the option of the old tax regime, in which many types of exemptions will have to be claimed, but if you do not claim tax exemption, then according to the tax slab under the old tax regime, you will have to pay 20 percent tax. However, if you claim tax exemption, then you can save the entire tax on earning 10 lakhs.
How can you save tax in the old tax regime?
- Under the old tax regime, 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 tax will have to be paid on Rs 8 lakh.
- If you invest up to Rs 50,000 annually in National Pension System (NPS), then under section 80CCD (1B) you are given an extra tax rebate of Rs 50,000. Now if you deduct another Rs 50,000, 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 subtract 2 lakhs from 7.50 lakhs, the total taxable income will be 5.50 lakhs.
- You can save up to 25 thousand rupees in tax by taking a medical policy under section 80D of income tax. This health insurance should have your name, your wife’s name and your children’s name. Apart from this, you can get an extra exemption of up to 50,000 rupees by buying health insurance in the name of your parents.
- In such a situation, if you subtract 75 thousand from 5.50 lakhs, the total tax liability will be 4.75 lakhs, which will be below the old tax regime limit of 5 lakh rupees. This means that you will not have to pay a single rupee tax on an annual income of 10 lakhs.
How much tax will have to be paid on earning 10 lakhs in the new tax regime?
Even though Finance Minister Nirmala Sitharaman has changed the tax slab in the new tax regime and increased the standard deduction, you will still have to pay tax on earning 10 lakhs. You cannot avail tax exemption by investing under the new tax regime. In such a situation, let us know how much tax will have to be paid if your income is Rs 10 lakh annually and you choose the new tax regime?
| 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 |
It is clear from the changes given in the new tax regime above that if someone’s annual income is Rs 10 lakh and he has chosen the option of new tax regime, then he will get a standard deduction of Rs 75000 instead of Rs 50 thousand. That is, the total taxable income will be Rs 9 lakh 25 thousand and tax payment will have to be made only Rs 42,500 instead of Rs 52,500. This means that in the new tax regime, those earning Rs 10 lakh annually will now be able to save Rs 10 thousand more.
