Simplifying the New Income Tax Slabs Post-budget 2020

Last Updated at: February 07, 2020
364
1.  What are the new income tax slabs in budget 2020?2.  What will be the changes in your tax post budget 2020?3.  Which one is better? The new or the existing tax slabs?

During her Budget Speech, the Hon’ble Finance Minister quoted “This is the Budget to boost peoples’ income and enhance their purchasing power”. With an objective to simplify the Income Tax Law further and provide considerable relief to the individual taxpayers, the Finance Minister has proposed a whole new tax regime in the much-awaited ‘Budget 2020’. The income tax rates have been slashed significantly and the tax slabs have been redesigned for individual taxpayers who will opt to forgo all deductions and exemptions.

In this blog, we will have a look at how your taxes will be impacted post-budget 2020.

  1. What are the new income tax slabs in budget 2020?

To make things easier for you, we are presenting a comparison of the pre and post-budget 2020 tax rates in the table below:

Taxable Income Range (In Rs.)

Tax Rate prior to Budget 2020 (Existing)

Tax Rate Post Budget 2020

0-2.5 lakh Exempted Exempted
2.5-5 lakh 5% 5%
5-7.5 lakh 20% 10%
7.5-10 lakh 20% 15%
10-12.5 lakh 30% 20%
12.5-15 lakh 30% 25%
Above 15 lakh 30% 30%

Note:

  • Surcharge & Cess on income tax in the new tax regime remain the same as before
  • About 70 of the present exemptions & deductions are due for removal in the new tax regime.
  • The remaining exemptions & deductions will be reviewed and rationalized soon.

File Your Income Tax Returns

  1. What will be the changes in your tax post budget 2020?

If you opt for the new personal taxation regime in the coming Financial Year, you will not be eligible to avail the below-mentioned deductions and exemptions-

  1. Leave Travel Allowances (LTAs) as mentioned  in clause 5, section 10 of the Income Tax Act 1961
  2. Housing Rent Allowances (HRAs) as mentioned in clause  13 A, section 10 of Income Tax Act 1961
  3. The professional tax deduction under section 16
  4. The standard deduction of Rs. 50,000 under section 16
  5. Deduction of Interest u/s 24 with respect to vacant or self-occupied property mentioned in sub-section 2, section 23 (Loss under income from house property for a rented house
  6. Deductions up to Rs 1, 50, 000 u/s 80 C for investments made towards provident fund, insurance premium, principal repayment of housing loan, etc.
  7. Any deduction under chapter VI-A including donations ( u/s 80 G), interest against education loan repayment ( 80 E), interest on savings account (80 TTA), additional interest on housing loan (80 EEA); but, excluding deductions u/s 80CCD (2) ( NPS Contribution by the employer).
  8. Others deductions/exemptions as prescribed

Which one is better? The new or the existing tax slabs?

This question may be playing in the minds of most taxpayers like you. Here, we are putting forward a couple of examples so that you can evaluate your options to go forward.

Example 1: Mr. Vineet Agarwal is a Manager at HCL Technologies. He earns a gross salary of Rs 12, 00, 000. The table below depicts his tax comparisons according to both the existing and new tax slabs.

Taxable Income Range (In Rs.)

Existing ( In Rs)

New (In Rs)

Income from salary 12,00,000 12,00,000
Deductions
Standard deduction 50,000 NIL
Interest on home loan u/s 24 2,00,000 NIL
80 C (Insurance premium etc.) 1,50,000 NIL
80 D ( Medical insurance premium) 25,000 NIL
Taxable income 7,75,000 12,00,000
Total tax 70,200 1,19,600

Example 2: Mr. Ayush Sharma is a Senior Manager at Infosys, Bangalore. He earns a gross salary of Rs 20, 00, 000. The table below depicts his tax comparisons according to both the existing and new tax slabs.

Taxable Income Range (In Rs.)

Existing ( In Rs)

New (In Rs)

Income from salary 20,00,000 20,00,000
Deductions
Standard deduction 50,000 NIL
Interest on home loan u/s 24 2,00,000 NIL
80 C (Insurance premium etc.) 1,50,000 NIL
80 D ( Medical insurance premium) 25,000 NIL
Taxable income 15,75,000 20,00,000
Total tax 2,96,400 3,51,000

Please note that you can exercise your preferred option for every previous year when you have no business income. This means you can switch between the existing and new tax regimes every financial year if you wish. If you think availing a certain deduction in a particular year will pay more dividends, you can opt for the old tax regime. Else you can opt for the new tax regime.

Simplifying the New Income Tax Slabs Post-budget 2020

364
1.  What are the new income tax slabs in budget 2020?2.  What will be the changes in your tax post budget 2020?3.  Which one is better? The new or the existing tax slabs?

During her Budget Speech, the Hon’ble Finance Minister quoted “This is the Budget to boost peoples’ income and enhance their purchasing power”. With an objective to simplify the Income Tax Law further and provide considerable relief to the individual taxpayers, the Finance Minister has proposed a whole new tax regime in the much-awaited ‘Budget 2020’. The income tax rates have been slashed significantly and the tax slabs have been redesigned for individual taxpayers who will opt to forgo all deductions and exemptions.

In this blog, we will have a look at how your taxes will be impacted post-budget 2020.

  1. What are the new income tax slabs in budget 2020?

To make things easier for you, we are presenting a comparison of the pre and post-budget 2020 tax rates in the table below:

Taxable Income Range (In Rs.)

Tax Rate prior to Budget 2020 (Existing)

Tax Rate Post Budget 2020

0-2.5 lakh Exempted Exempted
2.5-5 lakh 5% 5%
5-7.5 lakh 20% 10%
7.5-10 lakh 20% 15%
10-12.5 lakh 30% 20%
12.5-15 lakh 30% 25%
Above 15 lakh 30% 30%

Note:

  • Surcharge & Cess on income tax in the new tax regime remain the same as before
  • About 70 of the present exemptions & deductions are due for removal in the new tax regime.
  • The remaining exemptions & deductions will be reviewed and rationalized soon.

File Your Income Tax Returns

  1. What will be the changes in your tax post budget 2020?

If you opt for the new personal taxation regime in the coming Financial Year, you will not be eligible to avail the below-mentioned deductions and exemptions-

  1. Leave Travel Allowances (LTAs) as mentioned  in clause 5, section 10 of the Income Tax Act 1961
  2. Housing Rent Allowances (HRAs) as mentioned in clause  13 A, section 10 of Income Tax Act 1961
  3. The professional tax deduction under section 16
  4. The standard deduction of Rs. 50,000 under section 16
  5. Deduction of Interest u/s 24 with respect to vacant or self-occupied property mentioned in sub-section 2, section 23 (Loss under income from house property for a rented house
  6. Deductions up to Rs 1, 50, 000 u/s 80 C for investments made towards provident fund, insurance premium, principal repayment of housing loan, etc.
  7. Any deduction under chapter VI-A including donations ( u/s 80 G), interest against education loan repayment ( 80 E), interest on savings account (80 TTA), additional interest on housing loan (80 EEA); but, excluding deductions u/s 80CCD (2) ( NPS Contribution by the employer).
  8. Others deductions/exemptions as prescribed

Which one is better? The new or the existing tax slabs?

This question may be playing in the minds of most taxpayers like you. Here, we are putting forward a couple of examples so that you can evaluate your options to go forward.

Example 1: Mr. Vineet Agarwal is a Manager at HCL Technologies. He earns a gross salary of Rs 12, 00, 000. The table below depicts his tax comparisons according to both the existing and new tax slabs.

Taxable Income Range (In Rs.)

Existing ( In Rs)

New (In Rs)

Income from salary 12,00,000 12,00,000
Deductions
Standard deduction 50,000 NIL
Interest on home loan u/s 24 2,00,000 NIL
80 C (Insurance premium etc.) 1,50,000 NIL
80 D ( Medical insurance premium) 25,000 NIL
Taxable income 7,75,000 12,00,000
Total tax 70,200 1,19,600

Example 2: Mr. Ayush Sharma is a Senior Manager at Infosys, Bangalore. He earns a gross salary of Rs 20, 00, 000. The table below depicts his tax comparisons according to both the existing and new tax slabs.

Taxable Income Range (In Rs.)

Existing ( In Rs)

New (In Rs)

Income from salary 20,00,000 20,00,000
Deductions
Standard deduction 50,000 NIL
Interest on home loan u/s 24 2,00,000 NIL
80 C (Insurance premium etc.) 1,50,000 NIL
80 D ( Medical insurance premium) 25,000 NIL
Taxable income 15,75,000 20,00,000
Total tax 2,96,400 3,51,000

Please note that you can exercise your preferred option for every previous year when you have no business income. This means you can switch between the existing and new tax regimes every financial year if you wish. If you think availing a certain deduction in a particular year will pay more dividends, you can opt for the old tax regime. Else you can opt for the new tax regime.

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