Budget 2020 Income Tax Slabs and Rates changes Expectations: Presenting her second Union Budget in Parliament Saturday, Finance Minister Nirmala Sitharaman cut tax rates significantly for the salaried class, giving them relief, but provided they forgo exemptions.
For the financial year 2020-21 and as per the new tax rates,
- People earning up to Rs 5 lakh per annum will remain untaxable as it was earlier.
- Income between Rs 5 lakh to Rs 7.5 lakh will now pay 10% tax on their income which were earlier 20%.
- The Finance Minister proposed a cut of 5% from the existing 20% for those earning between Rs 7.5 lakh to Rs 10 lakh per annum. They will now to pay 15% tax.
- Earning between Rs 10 lakh to Rs 12.5 lakh per annum will now have to pay 20%.Earlier it was 30%.
- The new tax rate applicable to those earning in the range of Rs 12.5 lakh to 15 lakh per annum will be liable to pay tax at the rate of 25%.
- 30% of tax will be charged on salaries above Rs 15 lakh per annum.
Basic Income Tax Exemption slab and rates for AY 2021-22
|Upto Rs 2.50 lakhs
|Income more than Rs. 2.5 lakhs up to 5 lakh
|Income more than Rs. 5 lakhs up to 7.50 lakh
|Income more than 7.50 lakhs upto 10 lakhs
|Income more than 10 lakhs up to 12.50 lakhs
|Income more than 12.50 lakhs up to 15 lakhs
|Income above Rs. 15 Lkahs
So as per the new announcements, a person earning Rs 15 lakh per annum and not availing any deductions will pay Rs 1.95 lakh tax in place of Rs 2.73 lakh now.
The Finance Minister also said that Rs.40,000/- crore per annum will be revenue forgone from new income tax rates for individuals and that the Government has removed 70 exemptions, deductions with a view to further simplify tax regime.
Budget 2020 has offered tax payers the option to choose between the existing income tax regime and a new regime with slashed income tax rates and new income tax slabs but no tax exemptions.
The new tax regime offers lower tax rates and new tax slabs simultaneously removes tax exemptions and will result in lower tax outgo for the tax payer, according to the finance minister.
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Deduction not available in new option:
The assessee on opting for the new regime has to forgo the following exemptions:
- Leave Travel Concession under section 10(5)
- Standard deduction, deduction for entertainment allowance and employment/professional tax under section 16;
- Interest under section 24 in respect of self-occupied or vacant property
- Loss under the head income from house property for rented house shall not be allowed to be set off under any other head and would be allowed to be carried forward as per extant law;
- Deductions u/s 32AD, 33AB, 33ABA;
- Deduction under section 35AD or section 35CCC;
- Deduction from family pension under section 57(iia);
(xiv) Any deduction under chapter VIA (like section 80C, 80CCC, 80CCD, 80D, 80DD, 80DDB, 80E, 80EE, 80EEA, 80EEB, 80G, 80GG, 80GGA, 80GGC, 80IA, 80-IAB, 80-IAC, 80-IB, 80-IBA, etc).
- Various deduction for donation for or expenditure on scientific research u/s 35;
However, deduction under sub-section (2) of section 80CCD (employer contribution on account of employee in notified pension scheme) and
section 80JJAA (for new employment) can be claimed
This amendment will take effect from 1st April, 2021 and will, accordingly, apply in relation to the assessment year 2021-22 and subsequent assessment years.