In the budget 2020, the Finance Minister of India has announced a
new regime for income tax. However, the new income tax regime is optional, and
individuals can either opt for the new regime or file their taxes as per the
old regime.
New Tax Regime announced : Simplified Personal Income
Tax regime proposed in the Budget 2020. Have a look at the new income tax
rates:
Up to 5 lakh Income: 0%
From 5 lakh to 7.5 lakh: 10%
From 10 Lakh to 12.5 lakh: 20%
From 12.5 lakh to Rs 15 Lakh: 25%
Beyond Rs 15 Lakh: 30% (No Change)
Income tax rates will remain unchanged at 30% for people earning
above Rs 15 lakh.
However, people who want to follow the old Income
Tax Regime with exemptions can continue to do so.
Read: 45 TIPS TO SAVE TAX
Previous & Revised
Income Tax Slabs:
Income Slab
|
Income Tax Rate 2020-21
|
Income Tax Rate 2019-20
|
Up to Rs 5 lakh
|
Nil
|
Nil
|
Rs 5 to Rs 7.5 lakh
|
10%
|
20%
|
Rs 7.5 to Rs 10 lakh
|
15%
|
20%
|
Rs 10 to Rs 12.5 lakh
|
20%
|
30%
|
Rs 12.5 lakh to Rs 15 lakh
|
25%
|
30%
|
Over 15 lakh (No Change)
|
30%
|
30%
|
Amendment of Income Tax Act: Budget amends the
Income Tax Act, 1961 to introduce 'No Dispute, But Trust' scheme (Vivad se
Vishwas) to bring down the number of direct tax cases or disputes. At present,
over 4.5 lakh direct tax cases are pending in appellate tribunals.
Removal of Dividend Distribution Tax –
Considering that the companies were required to pay 15% DDT and additional
surcharge on dividend paid to shareholders which increases the tax burden for
investors, the Government proposes the removal of DDT Regime.
Cess & Duty - Customs duty on footwear and furniture will be increased.
Nominal Cess will be imposed on the import of medical equipment as
these are now being made in India.
Other taxation reforms announced in Union Budget 2020-21:
- It extends the Concessional Tax Rate of 15% to power generating
companies.
- Income tax rates will remain unchanged at 30% for people earning
above Rs 15 lakh
- Cooperative Societies Tax will be reduced to 22% plus cess &
surcharge from 30%
- Registration of NGOs and charity institutions will be made
electronic. Donations will be pre-filled in the ITR form to claim exemptions
Certain
contributions to be taxed as perquisite:
Contributions exceeding INR 7,50,000 made by employer to an
employee’s account in a recognized provident fund, notified pension scheme or
approved superannuation fund would be taxable perquisite in the hands of the
employees.The annual accretions to such contributions exceeding INR 7,50,000
would also be considered as taxable perquisite.
Taxation of benefits under Employee
Stock Benefit Plans:
Securities issued under Employee Stock Benefit
Plans by employers are taxable in the hands of the employees at the time of
their exercise (i.e. allotment). In case of eligible start-ups, the payment of
tax on such benefit is proposed to be deferred to within 14 days after (i) 5
years from the end of financial year in which options are exercised, or (ii)
date of sale of such security by the employee or (iii) the date of the employee
ceasing employment with the company, whichever is earliest.
Taxation of dividend from domestic
companies and mutual funds:
As per the existing provisions of the Income-tax, domestic
companies that declare, distribute or pay dividend are required to pay a
dividend distribution tax.Such dividend was exempt in the hands of the
recipients up to INR 10,00,000.
It is proposed to remove the dividend distribution tax payable by
companies and tax the dividend from such companies and mutual funds in the
hands of the recipients at the tax rates applicable to the respective
recipients (i.e. applicable slab rates for individuals.)
Enhanced
timeline to take loan to buy home under affordable housing scheme:
An additional deduction of INR 1,50,000 was made
available in the Finance Act 2019 in relation to interest on loan taken for acquisition
of house property for which the stamp duty value does not exceed INR
45,00,000.Such deduction was available subject to satisfaction of specified
conditions including that the loan is required to be sanctioned between 1 April
2019 to 31 March 2020. The present budget proposes to extend the timeline for
sanction of such loan to 31 March 2021.
Efficient tax administration:
The FM stressed the need for efficiency of tax administration and
proposed the incorporation of a “Taxpayer’s Charter” in the statute with the
objective of ending taxpayer harassment. The contents of the charter would be
notified soon.
A system to allot Permanent Account Number (PAN) based on Aadhaar
would be introduced by which PAN would be instantly allotted online without
requirement to fill up detailed application form.
In line with the faceless assessment process that has been introduced, the
budget proposed to introduce faceless appeal process.
It has been proposed to bring a scheme “Vivad se Vishwas” for
reducing litigations. Under the scheme, a taxpayer would be required to pay
only the amount of the disputed taxes and will get complete waiver of interest
and penalty provided the taxes are paid by 31 March 2020.Those who avail the
scheme after 31 March 2020 will have to pay some additional amount. The scheme
will remain open till 30 June 2020.
How much will you save under the new Income Tax Regime 2020-21?
Have a look at the total old and new income taxes calculated below
for all income slabs and know the total savings one can enjoy by adopting the
new regime without exemptions:
Income
(Rs)
|
New Rate
(2020-21)
|
Total Tax
(2020-21)
|
Old Rate
(2019-20)
|
Total Tax
(2019-20)
|
Tax Difference
|
Net Savings
|
500000
|
5%
|
12500
|
5%
|
12500
|
0
|
-9500
|
750,000
|
10%
|
37500
|
20%
|
62500
|
25000
|
6000
|
1,000,000
|
15%
|
75000
|
20%
|
112500
|
37500
|
9000
|
1,250,000
|
20%
|
125000
|
30%
|
187500
|
62500
|
24500
|
1,500,000
|
25%
|
187500
|
30%
|
262500
|
75000
|
27500
|
2,000,000
|
30%
|
337500
|
30%
|
412500
|
75000
|
18000
|
2,500,000
|
30%
|
487500
|
30%
|
562500
|
75000
|
18000
|
Note: These calculations are just for giving an idea about the income tax calculation in 2020-21. Please take opinion of economic experts before finalization.
Please comment with your queries / suggestions.
Hello, welcome to my blog, Smart Investor. I'm Satyanarayana, a banker & blogger, Investor from Visakha -patnam, India. You can read more about SML here.
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