How much relief will the middle class get due to a major change in the income tax system and what will be the impact of this?

Major changes in income tax system: In the budget presented by Union Finance Minister Nirmala Sitharaman on Saturday, salaried individuals with income up to Rs 12.75 lakh per annum were exempted from complete tax. This change in the income tax regime is not only a big relief for the middle class but also reflects the government’s eagerness to implement fiscal stimulus to strengthen economic growth. Let us know what will be the impact of this change in the income tax system.

The change in tax slab is beneficial for which category of persons?

The new tax system is applicable to any individual. Whether he is a member of a Hindu undivided family, or an organisation of persons (other than a co-operative society), or a body (of persons) – whether incorporated or not; or the person referred to in sub-clause (vii) of clause (31) of section two. Accordingly, all these individuals will benefit from the change in tax slabs.

How will a person with an income of Rs 12 lakhs get the benefit of the new rates?

Earlier, a person had to pay a tax of Rs 80,000 (in the new system) for an income of Rs 12 lakh. Now he will not have to pay any tax on such income.

Is standard deduction on salary available in the new system?

Yes, the standard deduction of Rs 75,000 is available for the taxpayer in the new system. Therefore, a salaried taxpayer will not have to pay any tax where his income is less than or equal to Rs 12,75,000 before the standard deduction.

Are there any standard deductions available in the old system?

The standard deduction of Rs 50,000 is available in the old system.

How much tax will a taxpayer with an income of Rs 12,10,000 have to pay? What is marginal relief?

Such a taxpayer has a tax liability of only Rs 61,500 as per the slab. However, a person with an income of Rs 12 lakh pays zero tax. By providing modest relief, it has been ensured that a person with an income of more than Rs 12 lakh will have to pay only a marginal amount of tax equivalent to income above Rs 12 lakh so that he also has Rs 12 lakh to take home. In this case, he will have to pay a tax of Rs 10,000.

What is the maximum amount of exemption available to any taxpayer?

The maximum exemption is Rs 60,000 which is for a taxpayer with an income of Rs 12 lakh, on which tax is payable as per the new slab.