In the Union Budget 2020, Finance Minister, Mrs. Nirmala Sitharaman has announced new slabs for income tax rates for those earning up to
15 Lacs per annum/15 L.P.A. The new Income Tax Slab would come into effect from the Financial Year 2020-2021.
The new Slab scheme would be optional and be applicable to those foregoing exemptions and deductions. These deductions include standard deductions, Section 80C, 80CCC, 80CCD, 80D, 80DD, 80DDB, 80E, 80EE, 80EEA, 80EEB, 80G, 80GG, 80GGA, 80GGC, 80IA, 80-IAB, 80-IAC, 80-IB, 80-IBA of the Income Tax Act 1961 as amended thereof (Act), House Rent Allowance (HRA), Leave Travel Allowance (LTA), interest on housing loan on self-occupied property among others. The maximum benefit in the Scheme is up to Rs. 78,000/- (as the Finance Minister said that a person who is earning Rs. 15 Lacs p.a. and not evading any deduction would now pay Rs. 1.95 Lacs instead of Rs. 2.73 Lacs. As the new Slabs are optional, tax payers would have to see if they have a greater benefit under new Tax Slab Rate or not, it depends upon the circumstance of each case. Furthermore, individuals with the business income would not be able to switch back and forth to the new rates and back, however others could.
The New Income Tax Slabs as per Budget 2020 are as follows:-
|Income Tax Slab (in |
|2.5 – 5.0||5%||5%||0|
|5.0 – 7.5||20%||10%||26,000/-|
|7.5 – 10.0||20%||15%||39,000/-|
|10.0 – 12.5||30%||20%||65,000/-|
|12.5 – 15.0||30%||25%||78,000/-|
|15.0 or more||30%||30%||No change|
The Finance Minister, in order to promote affordable housing, has further extended the date for availing the additional tax benefit on the purchase of new houses (up to Rs. 45 Lacs) to 31 March 2021. The loan bearer to purchase house up to Rs. 45 Lacs would now be eligible for additional tax deduction.
Prior to the Budget 2020, in addition to the tax paid by the company on profits, companies were required pay tax on the dividend paid to its shareholders @ 15% plus cess and surcharge under the name of Dividend Distribution Tax (DDT). However, the Finance Minister has presented a change in the new rules, by deducting the tax on dividends only in the hands of the recipients at their applicable rates.
People coming under the slab of income upwards of Rs.7.5 Lacs would be taxed for employer’s contribution such as Employer’s Provident Fund (EPF), National Pension Scheme (NPS) and superannuation.
Thus, as per various experts, the Government has made efforts to bring about reforms in the income tax sector of India.
The Indian Lawyer