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The Government of India introduced Section 115BAC in the Income Tax Act in tax year 2020-21, which allows you to opt for lower tax rates at which your salary can be taxed. The lower tax rates are specified under what is referred to as the “Simplified Tax Regime”. The below table presents the tax rates in effect for FY 2025-26 for your information.
Total Annual Income (Rs) | Simplified Regime (%) | Old Regime (%), for employees below 60 years of age |
Up to 2,50,000 | Nil | Nil |
2,50,001 to 3,00,000 | Nil | 5 |
3,00,001 to 4,00,000 | Nil | 5 |
4,00,001 to 5,00,000 | 5 |
5 | ||
5,00,001 to 8,00,000 | 5 | 20 |
8,00,001 to 10,00,000 | 10 | 20 |
10,00,001 to 12,00,000 | 10 | 30 |
12,00,001 to 16,00,000 | 15 | 30 |
16,00,001 to 20,00,000 | 20 | 30 |
20,00, |
001 to 24,00,000 | 25 | 30 |
Above 24,00,000 | 30 | 30 |
You can choose either the “Simplified Regime” or the “Old Regime” for FY 20232025-2426. If you opt for lower tax rates (Simplified Regime) you will have to forego pretty much all the exemptions/losses/deductions available otherwise. For example, under the Simplified Regime, no benefits are available under Section 80C (Life insurance, etc.), Section 80D (Mediclaim), Section 80E (Interest on education loan), House Rent Allowance, Leave Travel Allowance, other allowances, Standard Deduction, losses on house property on account of home loan interest, etc. This means that you would lose almost all the tax benefits which are available by way of exemptions/deductions if you opt for lower tax rates (Simplified Regime).
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