You can save income tax on your pay in a variety of ways. Furthermore, the only thing you need to do is use tax-saving tools wisely. Let’s take a closer look at the new Income Tax Slabs proposed in Budget 2020 in comparison to the pre-budget 2020 tax slabs before going into further depth. Note: In the new tax regime, the surcharge and cess on income tax remain the same as previously.

Taxpayers have the option of continuing with the old tax system or switching to the new one. Furthermore, if you choose the new tax regime, you will be ineligible for deductions and exemptions that would allow you to save income tax in India. Furthermore, this decision must be taken while filing the IT return.

New income tax slabs in budget 2020 (for FY 2020-21)

Note: In the new tax regime, the surcharge and cess on income tax remain the same as previously. 

Taxpayers have the option of continuing with the old tax system or switching to the new one. Furthermore, if you choose the new tax regime, you will be ineligible for deductions and exemptions that would allow you to save income tax in India. Furthermore, this decision must be taken while filing the IT return.

On a salary of RS. 15 lakh per annum, how can you save tax?

Do you want to stay with the old tax system or make the switch to the new one? Well, this selection will have an impact on how much you can save on your pay in terms of income tax.

The table below will give you a good indication of how to save money on your tax salary

*Assuming a standard deduction of Rs.50,000 and a tax exemption of Rs.1,50,000 under Section 80[C].

In addition, the table illustrates that if your salary is RS. 15 LPA, switching to the new tax structure can save you up to RS. 15,600. This is, of course, assuming that you are claiming full exemption under Section 80 C and also making use of the standard deduction of RS. 50,000 to reduce your tax liability on salary income.

However, there is a catch! By keeping to the old tax regime, you stand to gain more if you invest in the greatest potential capacity in all channels.

The following example will help you understand

Let us now assume you are capable of making sufficient tax-saving investments to take advantage of the maximum deduction allowed in various tax-saving routes permitted by the IT department (as stated below)- 

These tax-saving strategies are no longer available if you migrate to the new tax regime. Furthermore, you would not be able to save the RS. 4, 85, 000 that you would have been able to save if you had adhered to the previous income tax regime. In addition, here’s a comparison of your tax obligations under the old and new tax regimes.

Furthermore, the following figure clearly illustrates that, while converting to the new tax regime will save you RS. 15,600, you would lose access to the old regime’s exemptions and deductions. It is, therefore, preferable to stick to the old tax regime if you are able to invest more in tax-saving avenues and obtain the greatest exemption/deduction available. Furthermore, if you stay in the old tax regime, you can have a comparative advantage of up to RS. 73820 in this scenario.

Questions that are frequently asked

1: If I earn 15 lakh, how can I save money on taxes?

The amount of tax you can save is determined by whether you stay with the old tax system or switch to the new one.

Let’s say you want to take advantage of the standard deduction of Rs. 50,000 and the tax exemption of Rs.150,000 under Section 80. (C).

A) In the previous tax regime–

Furthermore, after deducting your deductions and exemptions, your tax bill will be Rs 2,10,600.

B) In the new tax system– 

Furthermore, in this tax system, you are not permitted to take advantage of any deductions or exemptions. The total amount of tax you owe is Rs 195000.

If you move to the new tax structure, you will gain RS. 15600.

2: How much tax do I’ve got to pay on a salary of 15 lakhs?

A) In the old tax regime–

Your liabilities are going to be RS. 2, 10,600 (*Assuming you avail ₹ 50,000 within the standard deduction and ₹ 150000 in tax exemption u/s 80(C)) 

B) In the new tax regime–

You are not allowed to avail of any deduction/exemption during this tax structure. Your total liabilities are Rs 195000.