If you’ve been putting your money into options like the Public Provident Fund (PPF) or LIC to cut down on taxes, you’re in for some good news starting April 1. That’s when the new financial year kicks off, bringing along a bunch of new income tax rules. During the budget presentation on February 1, Union Finance Minister Nirmala Sitharaman made some major tax-related announcements that will benefit those earning Rs 12 lakh or more annually.
So, what’s the scoop?
In her budget speech, Finance Minister Nirmala Sitharaman revealed some significant tax cuts for the middle class. She mentioned that under the new tax regime, individuals with an annual income of up to Rs 12 lakh won’t have to pay any taxes. This is a jump from the previous exemption limit of Rs 7 lakh. Plus, there’s an extra standard deduction of Rs 75,000 for salaried individuals. The budget documents also indicate that the tax brackets for those earning above this threshold have been adjusted, allowing people making up to Rs 25 lakh a year to save as much as Rs 1.1 lakh in taxes annually.
Investing to save on taxes
Previously, under the old tax system, people would invest in various schemes to lower their tax bills. In that system, you could claim a tax deduction of up to Rs 1.5 lakh under section 80C. This included small savings plans like Sukanya and PPF, as well as investments in LIC. However, with the new rules coming into play, there’s no need to stress about taxes if your annual income is up to Rs 12 lakh. So, if you’ve been investing just to save on taxes, you can relax now!
How many individuals are gaining from the new regulation?
Recently, Ravi Agarwal, the Chairman of the Central Board of Direct Taxes (CBDT), mentioned that following the budget announcement which exempts income up to Rs 12 lakh from taxation and modifies all tax brackets, over 90 percent of individual taxpayers could switch to the new tax system. Currently, this percentage stands at around 75 percent.