Finance Minister Niramala Sitharaman presented the Union Budget 2020-21 in the Lok Sabha on 3rd February 2020. This is the second budget after Narendra Modi led National Democratic Alliance returned to power for a second term. Finance Minister introduced a new optional personal income tax slabs with lower rates and announced multi-billion-dollar farm, infra, and a healthcare package to revive growth in the country.
The new tax regime shall be optional for the taxpayers. Under the new tax regime, taxpayers will not be eligible for rebates and exemptions. An individual, who is currently availing more deductions and exemption under the Income Tax Act may choose to avail them and continue to pay tax in the old regime.
Here is the comparison of the tax slabs under new and old regime:
||New Tax Rate
||Existing Tax Rate
|Up to Rs 2.5 Lakhs
|Rs 2.5- Rs 5 Lakhs
|Rs 5- Rs 7.5 Lakhs
|Rs 7.5 -Rs 10 Lakhs
|Rs 10 – Rs 12.5 Lakhs
|Rs 12.5 – Rs 15 Lakhs
|Above Rs 15 Lakhs
If one goeswith the new slab rates as announced in the Budget, then one will not be eligible to claim the following tax benefits:
- Leave travel concession as contained in clause (5) of section 10;
- House rent allowance as contained in clause (13A) of section 10;
- Some of the allowance as contained in clause (14) of section 10;
- Standard deduction of Rs. 50,000 u/s 16;
- Employment/professional tax deduction as contained in section 16;
- Interest under section 24 in respect of self-occupied or vacant property referred to in sub-section (2) of section 23. (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);
- Any deduction under chapter VI-A; [except 80CCD (2) – NPS Contribution by the employer]
- Others as prescribed
The option shall be exercised for every previous year where the individual or the HUF has no business income, and in other cases the option once exercised for a previous year shall be valid for that previous year and all subsequent years.
As per the budget proposal, a taxpayer opting for the new tax regime will have to forgo all the commonly available tax-breaks such as those available under sections 80C, 80D etc except for section 80CCD (2), i.e., employer’s contribution to NPS. These are changes into new budget, which will applicable from FY 2020-2021.
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The new Tax Slabs, ae scheduled to be released in Workrig’s income tax module, by March 2020. You can also request further information by writing to us at firstname.lastname@example.org to know about the software.