The finance minister Nirmala Sitharaman has presented her fifth budget. This is the final full budget of the Narendra Modi government before the 2024 Lok Sabha elections. The budget has given special attention to taxpayers. The finance minister has proposed to increase the tax rate for taxpayers. Currently, no tax is levied on an individual's annual income up to INR 5 lakh. This level has been proposed to increase to INR 7 lakh under the new tax regime. However, it remains to be seen how this new tax regime will work and how much tax one will have to pay on their earnings compared to the previous regime.
Finance Minister Nirmala Sitharaman announced the second budget of 2020 and stated that the new income tax regime is optional. Taxpayers have the choice to stick to the old tax system with its available exemptions and deductions, if they prefer.
In the old tax system, taxpayers can claim various exemptions, such as INR 1.5 lakh under 80C and INR 25 thousand under 80D. There are many ways to claim tax exemptions.
In contrast, under the new tax system, the government offers to increase the tax slab, resulting in lower tax payment but with no possibility of claiming exemptions.
The old tax system remains in place, and it is up to the individual to choose the new or old system based on what is more beneficial for them.
So, the decision to claim exemptions under the old tax system or opt for the new tax system without exemptions lies solely with the taxpayer.