Extra benefit under the new tax law for persons with taxable incomes beyond Rs. 7 lakh per year

The government is going all out to convince individual taxpayers to migrate to the new income tax regime by overhauling slabs and offering additional sops to the lowest as well as the topmost strata of taxpayers.

After announcing the changes to the new tax regime in her budget speech, Sitharaman had told reporters that the government’s effort was to make the new tax regime, which does not have any exemptions, lucrative enough for taxpayers. Though the new regime was introduced in 2020, migration to it from the old and deduction-heavy tax system was extremely underwhelming so far. The government expects that the tide will now turn as the new regime will lead to savings for most taxpayers, except those claiming heavy tax exemptions.

While no changes were made in the old tax regime in the Budget, the government increased the scope of rebate to those with a taxable income of Rs 7 lakh per year from the earlier limit of Rs 5 lakh in the new system. The super-rich–those with annual income of over Rs 5 crore–will also benefit from a significant cut income tax surcharge to 25 per cent from 37 per cent under the new regime. This would reduce the effective rate of income tax for this group to 39 per cent from 42.7 per cent. The tax burden under the new scheme was also Rationalised by revising its slabs and introducing the benefit of standard deduction. At the time, the revenue foregone due to changes in the new tax regime was pegged at around Rs 35,000 crore.