The new tax regime was launched in the Union Budget 2020 and is the default tax regime at present. Taxpayers have to fill out
Form 10-IEA if they wish to opt for the old tax regime.
The new tax regime permits limited deductions and exemptions, while offering lower tax rates uniformly regardless of age.
Some deductions are allowed such as employer's contribution to the National Pension System (NPS), Employee Provident Fund (EPF) accounts and family pension.
Some exemptions are also available including transport allowance, conveyance allowance, gratuity and interest paid on housing loan taken for a rented-out property.
Additionally, the new tax regime offers a full tax rebate on an income up to ₹7 lakh under Section 87A of the Income Tax Act.
There is no tax on income up to ₹3 lakh. For income between ₹3 lakh to ₹6 lakh, there’s a tax of 5%, which increases to 10% for income between ₹6 lakh and ₹9 lakh.
For income ranging from ₹9 lakh to ₹12 lakh, the tax rate is 15%. It increases to 20% for income from ₹12 lakh to ₹15 lakh. The tax rate is 30% for income above ₹15 lakh.