Budget 2020: FM Nirmala Sitharaman introduces simplified income tax regime for individuals - See detailed chart of chart with tax brackets

Union Finance Minister Nirmala Sitharaman who presented the Union Budget 2020-21 on Saturday in the Parliament has proposed a new simplified the individual tax regime for the financial year 2020-21 (FY21). The new tax regime will be optional and the taxpayers will be given the choice to either remain in the old regime with exemptions and deductions or opt for the new reduced tax rate without those exemptions. 

The new tax regime becomes effective on April 1, 2020.

Those who fall under the income range Rs0-2.5 lakhs will not have to pay any tax, while those who earn between Rs2.5-5 lakhs will fall under the tax bracket of 5%. Those under the income range of Rs5-7.5 lakh will fall under the tax slab of 10%. Those with an annual income of Rs7.5-10 lakh will fall under the tax slab is 15%, while those in Rs10-12.5 lakhs range will fall under tax slab of 20%. Similarly, people with income under Rs12.5-5 lakhs will fall under the tax bracket of 25% and those with income above Rs15 lakh will fall under 30% slab.

New Income Tax Regime and comparison with the tax regime of FY20

The government will have a revenue loss of Rs 40,000 crore as a consequence of income tax rate tweaking. 

Besides, the Finance Minister has revised the fiscal deficit for the ongoing financial year to 3.8 per cent from 3.3 per cent. She keeps the fiscal deficit target for the upcoming financial year 2020-21 at 3.5per cent of the GDP.