New Income Tax structure for 2020 – 2021 has been released in the latest budget session presented by the Finance Ministry recently. At the outset the new budget appeared very Taxpayer friendly as it gives feeling of lower tax liability. Diving deep in to the many aspects of the budget did we understand that it was a lot more complicated than we initially thought.
The new tax structure does not allow all tax payers to benefit out of the same but only those who are willing to forego the exemption clause.
As per the new structure, the tax payers need to do two types of calculations one with tax deductions and another without the same.
- Tax Payers who are willing to claim IT Deductions and Exemptions(Old Tax Regime)
- Taxpayers who are unwilling to claim IT Deductions and Exemptions(New tax Regime)
govt has given option to tax payers to Continue with popular Tax exemption like 80C, 80D,80 CCD (NPS), Standard deduction, housing loan interest,Principal Repayment,HRA (Total 100 Exemptions) with Last Year tax structure(FY20-21).
The below deductions, exemptions the earlier tax structure offered have been scrapped from the new one.If you wish to forgo these below exemptions then you can avail the New tax structure proposed in Budget
(i) Section 16 – Standard deduction and deduction towards entertainment allowance and employment/professional tax (ii) Clause VIA sections All deductions 80C, 80CCC, 80CCD, 80D, 80DD, 80DDB, 80E, 80EE, 80EEA,
80EEB, 80G, 80GG, 80GGA, 80GGC, 80IA, 80-IAB, 80-IAC, 80-IB, 80-IBA, etc).
(iii) Sub-section (2) of section 23 – Interest under section 24 towards self-occupied or vacant property(Home Loan Interest Deduction).
(iv) Clause (13A) of section 10 House rent allowance
(v) Clause 5 of Section 10 – Leave travel concession
(vi) Clause (2a) of section 57 – Deduction from family pension
(vii) Specific allowances in Clause (14) of section 10
(viii) Sub-clause (2) or sub-clause (2A) or sub-clause (3) of sub-section (1) or sub-section (2AA) of section 35 – All deductions towards donation or expenditure for Scientific Research.
(ix) Clause (2A) of sub-section (1) of section 32 – Additional depreciation
(x) Section 32AD, 33AB, 33ABA – All applicable deductions
(xi) Clause (32) of section 10 – Allowance for income of minor
(xii) Deduction under section 35AD or section 35CCC;
(xiii) Section 10AA – Exemption for SEZ unit
(xiv) Clause (17) of section 10 – Allowances to MPs/MLAs
Let us now look at some exemptions and deductions that can be claimed under the new tax structure
- Deduction under Sub-section (2) of section 80CCD (Employer contribution towards Employee Pension Scheme) and Section 80JJAA towards new Employees
- All retirement benefits that includes Gratuity
- Pension commutation
- Leave Encashment at the time of Retirement
- Retrenchment Compensation
- VRS benefits
- Employer contribution of EPFO
- NPS Withdrawal Benefits
- Educational Scholarships
- Payments towards Awards instituted in public interest
Which tax regime is beneficial depend upon income composition,Exemptions to be claimed & investments done.Each individual has to do his own calculation based on his saving habits,Living on Rent or Self Occupied House etc & figure out.however we have figured Some General Calculations below with 25 Lakh,15 Lakh and 10 Lakh of Salary Income.Detailed Table Mentioned Below.
Income Tax Slab Rate for FY 2020-21
As per announcement New Income Tax Slab for FY 2020-21 is given below.
In our View It should be Better to continue with Old Tax Structure with Exemptions on there Side as it is clearly visible on taxation front that the New Tax Slab(optional) that individual has to shell out more taxes ,We as a Financial Consultant Believe with Forced tax saving People start their Saving Habits.It goes a Long way to help people achieve Financial Freedom.So there is No Change/Benefit for People For Taking Exemptions.
However you can calculate Your Suitability by checking on below Link
https://www.incometaxindiaefiling.gov.in/Tax_Calculator/
