Union Budget 2020-21 Expectations for Income Tax: In the final year’s Union Budget, Finance Minister Nirmala Sitharaman had introduced a new revenue tax regime that consists of seven tax slabs – Nil, 5 per cent, 10 per cent, 15 per cent, 20 per cent, 25 per cent and 30 per cent – in comparison to 4 tax slabs beneath the old revenue tax regime – Nil, 5 per cent, 20 per cent and 30 per cent.
Both the tax regimes will continue and it will be optional for the taxpayers to pick out a regime, Sitharaman declared in her spending budget speech.
Although, the new revenue tax regime has reduce tax prices on revenue amongst Rs 5 lakh to Rs 15 lakh, but no tax exemptions and deductions will be obtainable in the regime.
As a outcome, a salaried taxpayer would drop the existing positive aspects of more than Rs 5 lakh in the types of exemptions and deductions obtainable beneath numerous sections in the old revenue tax regime by switching to the new revenue tax regime.
“I have to pay additional tax of over Rs 1 lakh if the old income tax regime is discontinued,” stated Saral Dev (name changed), who is a government employee and had taken dwelling loan to acquire a flat in 2019.
New revenue tax regime vs old: What is very good for you? Check comparison
Under the old revenue tax regime, taxpayers get a deduction up to Rs 2 lakh u/s 24 of the Income Tax Act on interest paid on dwelling loan in a economic year. Moreover, an extra tax advantage of up to Rs 1.5 lakh is also obtainable u/s 80EEA of the Income Tax Act, if the interest is paid on dwelling loan taken to acquire an very affordable dwelling, topic to some circumstances.
Apart from the interest on dwelling loan, a regular salaried taxpayer would also drop the positive aspects of HRA exemption, Standard Deduction, which was Rs 50,000 in the Financial Year (FY) 2019-20, deductions u/s 80C up to Rs 1.5 lakh, deduction up to Rs 50,000 u/s 80CCD(1B) on voluntary contributions to Tier-1 Accounts of National Pension System (NPS), deductions up to Rs 75,000 u/s 80D on well being insurance coverage premium paid for self and household, as nicely as the premium paid for senior citizen parents or costs incurred on their therapy.
“Last year the new income tax regime was optional and I hope it will not become mandatory,” stated Saral.
So, taxpayers hope that the Finance Minister will continue with the old revenue tax regime as an optional a single this year and in future as nicely.