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New tax regime introduced by union budget 2020
New tax regime introduced by the union budget 2020
With the second budget presented by the Finance Minister Nirmala Sitharaman taxpayers were looking forward for various reliefs in regards to payment of taxes. The major thing introduced by the union budget 2020 is the new tax regime for individual tax payer providing them with lower tax rates but at the same time limiting various deductions which could be claimed earlier. This new tax regime is optional and the tax payer can opt to continue with the old tax scheme.
The old and new tax regime are as follows;
|
SL.No |
Income slab |
Old tax rates |
Income slabs |
New tax rate |
|
01 |
O to 2.5 lakhs |
nil |
0 to 2.5 lakhs |
nil |
|
02 |
2.5 to 5 lakhs |
5% |
2.5 lakhs to 5 lakhs |
5% |
|
03 |
5 lakhs to 10 lakhs |
20% |
5 lakhs to 7.5 lakhs |
10% |
|
04 |
Above 10 lakhs |
30% |
7.5 lakhs to 10 lakhs |
15% |
|
05 |
|
|
10 lakhs to 12.5 lakhs |
20% |
|
06 |
|
|
12.5lakhs to 15 lakhs |
25% |
|
07 |
|
|
Above 15 lakhs |
30% |
Surcharge and cess are applicable as before.
The point which was widely discussed and created confusion in the minds of tax payer was the amount and number of deductions they can claim under the new regime of tax and which regime is more beneficial to them.
The deductions which can be claimed under the old scheme now 70 such deductions if opted for the new tax regime will be disallowed. Which means that a tax payer may pay less taxes by opting for the new tax regime but has to forgo these 70 deductions. Under the old scheme the major deduction which the tax payers claim is under 80 C Chapter VI A of the income tax Act along with house rent allowance and standard deduction but if taxpayer opts for the new regime of tax, he has to forgo these major deductions.
Which tax regime is better for the tax payer and which one he should opt for depends upon the income of the tax payer. Taxpayer has to do lot of calculations to go for the right choice of tax regime.
