NEW INCOME TAX SLAB RATES 2020-21 - Smart Investor - An investment in knowledge pays the best interest

Sunday, February 9, 2020

NEW INCOME TAX SLAB RATES 2020-21

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.


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.

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