If you earn up to Rs. 7 lakh, you don't have to pay taxes. But what if you earn Rs. 8 lakh? This CFA breaks down the new tax regime.
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00:00The new tax rates are
00:02The first question that we ask is
00:04How much tax will be left?
00:08Let me remind you that tax slabs
00:10are progressive taxes. Pure salary
00:12would be broken down into the tax
00:14slabs and each slab would be
00:16taxed accordingly. Persons in the new
00:18tax regime with income
00:20up to 7 lakhs will not
00:22have to pay any tax at all
00:24How is that possible if the
00:26income tax slab from 3 to
00:286 lakhs per annum is at 5%
00:32The first 3 lakhs of the
00:347 lakhs is taxed at 0%
00:36which means 0 tax liability
00:38The next 3 lakhs would be taxed
00:40at 5% leading to a
00:4215,000 in tax liability
00:44Final amount left is 1 lakh
00:46out of the 7 lakhs which will be taxed
00:48at 10%. So that tax liability
00:50is 10,000. The total is
00:5215,000 plus 10,000 which is
00:5425,000. And here comes
00:56the section 87A
00:58which becomes applicable and your
01:00entire tax liability becomes 0
01:04But what about if I earn 8 lakhs
01:06per annum? Will I still get the
01:0887A deduction?
01:10The answer is no. Your tax
01:12liability at 8 lakhs would be
01:140 plus 15,000
01:16plus 25,000 which is
01:1835,000
01:21An individual with an
01:23annual income of 9 lakhs
01:25will be required to pay
01:27only 45,000 rupees
01:29From 0 to 3 lakhs you are
01:31paying no taxes. For the
01:33next 3 lakhs you are paying
01:355% which is 15,000
01:37For the next 3 lakhs you are
01:39paying 10,000 because it
01:41falls under the 6 to 9
01:43So that makes your total tax
01:45liability to be 0 plus
01:4715,000 plus 30,000
01:50which is 45,000 as indicated
01:52in the budget
01:54But now you will say
01:56Shivi, if I take all these
01:58exemptions, ATC, HRA etc.
02:00in the old tax regime, my tax
02:02liability is going to be exactly
02:04the same or almost the same
02:06And you will be exactly right
02:08We are also making the new income
02:10tax regime as the default tax
02:12regime. However,
02:14citizens will continue to have
02:16the option to avail the benefit
02:18of the old tax regime
02:20See, looking at the big picture,
02:22the big government has to ensure
02:24that the tax revenue collection
02:26is adequate. They also
02:28want to incentivize people to
02:30pay taxes on time and incentivize
02:32them to actually pay the taxes
02:34so they don't evade taxes
02:38Provide more liquidity in the
02:40hands of the taxpayers. And now
02:42I am more likely to go and
02:44buy movie tickets and buy popcorn
02:46And hence contributing more
02:48to the economic growth
02:50Increasing disposable incomes in the
02:52hands of the masses is one of the
02:54classic levers used by the government
02:56to spur economic development
03:00I propose to reduce
03:02the highest surcharge rate
03:04from 37%
03:06to 25%
03:08Because if the taxes for high net
03:10worth individuals is too high
03:12they are more likely to take their
03:14businesses elsewhere or evade taxes