Income Tax Slab Rates for FY 2020-21 / AY 2021-22 | Budget 2020 Key Highlights

The Indian Finance Minister has tabled today, the Union General Budget 2020-21 in the Parliament. Below are the latest Income Tax Slab Rates for FY 2020-21 or AY 2021-22. (FY is Financial Year and AY is Assessment Year)

Latest Income Tax Slab Rates FY 2020-21

Effective from FY 2020-21, the individual tax assessee will have an option to go for new Tax Slab Rates by forgoing the existing Income Tax Deductions and Exemptions, like HRA, Section 80C, Home loan tax benefits etc.,

So, to avail the below new tax regime, which is optional, taxpayers will have to let go of income tax exemptions.

  • Income below Rs 2.5 lakh will continue to remain tax-exempt.
  • Income between Rs 2.5 to Rs 5 lakh will be taxed at 5% but will continue to get Section 87a rebate, hence no tax liability.
  • Under the new regime, taxpayers will pay 10%, 15%, 20% and 25% for incomes between Rs 5 to Rs 7.5 lakh, Rs 7.5 to Rs 10 lakh, Rs 10 to Rs 12.5 lakh and Rs 12.5 to Rs 15 lakh, respectively.
Income Tax Slab Rates FY 2020-21 budget 2020-21 latest IT slabs for Assessment Year 2021-22 pic
Latest Income Tax Slab Rates FY 2020-21 / AY 2021-22 (without tax deductions/exemptions)

In case, you wish to claim your IT deductions and exemptions then your income will be subject to tax as per the existing (FY 2019-20) income tax slab rates (as below);

Income Tax Slab Rates FY 2020-21 budget 2020-21 if tax deductions exemptions are claimed
Income Tax Rates FY 2020-21 (if tax deductions / exemptions are to be claimed)

An individual tax assessee has to now calculate his/her tax liability with and without tax deductions and then can opt for a tax slab rate that is more beneficial to him/her.

Calculation of Income Tax for FY 2020-21 / AY 2021-22 | Illustrations

Let’s assume an individual is earning Rs 15 Lakh, wants to claim Rs 1.5 lakh u/s 80c, Rs 1 lakh as HRA and Rs 50,000 as Standard Deduction.

If he opts for new tax slab rate, without claiming tax deductions then the tax liability can be around Rs 1,95,000 (including cess).

In case, he opts for existing/old tax slab rate then his tax liability can be around Rs 1,78,880.

Budget 2020-21 & Personal Finance : Key Highlights 

Below are the latest personal finance related proposals that have been made in Budget 2020-21 ;

  • A provision for instant allotment of PAN based on Aadhaar will be provided.
  • A new direct tax dispute settlement under ‘Vivad se Vishwaas Scheme’ will be introduced. No penalty will be charged if taxpayers pay by March 31, 2020. Here, only disputed tax amount has to be paid.
  • The Rs 1.5 lakh Additional Income Tax deduction on affordable home loans will be extended for one more year, u/s 80EEA. This deduction can not be claimed if you opt for new tax slabs.
  • Bank Deposit Insurance has been raised to Rs 5 lakh from the existing Rs 1 lakh limit.
    • If a bank defaults or goes bankrupt then each depositor in a bank will be insured up to a maximum of Rs. 5,00,000 for both principal and interest amount held by him.
  • A proposal has been made to facilitate separation of NPS Trust for government employees from PFRDA (Pension Fund Regulatory and Development Authority).
  • Govt to raise funds via LIC IPO in FY 2020-21.
  • Divident Distribution Tax (DDT) in the hands of Companies will be abolished.

(This article is based on limited available information, if required, the content will be edited/updated. Kindly note that these are just budget proposals and need to be enacted by the Parliament.)

Continue reading:

  1. New Income Tax Slab Rates Vs Old Tax Regime | Which one is better?
  2. Income Tax Deductions List FY 2019-20 | List of important Income Tax Exemptions for AY 2020-21
  3. Income Tax Exemption Vs Tax Deduction Vs Tax Rebate Vs TDS | Key Differences
  4. How Income Tax Department tracks the High Value Financial Transactions?
  5. Income Tax Slab Rates for FY 2019-20 / AY 2020-21

(Image courtesy of Stuart Miles at (Post first published on 01-February-2020) 

  • Anand says:

    Can I change the option (old or new tax slab) every A Y ?

  • Nicolas says:

    Hi Sree …. What if i want to take new tax slab but can i do payment in ppf, would that be an issue?

    • Sreekanth Reddy says:

      Dear Nicolas,
      You can opt for new tax slab rate, can also save in PPF but its just that you can not claim those contributions u/s 80c.

      • Nicolas says:

        Thanks Sree .. but i think i will be benefited if i take old tax slabs … my earning is apx 18.5 L/year …. taking 2L HRA claim
        Now 2L HRA + 50000 Standard deduction + 1.5 80c i can’t claim due to which my taxable salary becomes 14.5 L/year …. your thoughts?

        • Sreekanth Reddy says:

          Yes Nicolas.. For an individual who claims maximum tax deductions, new tax regime may not be that beneficial..

          • Mihir says:

            Hello Sreekanth,

            In above you commented Maximum tax deduction , what does it mean maximum?

            its 80C -1.5 L
            80D: 25k
            HRA: 2 La
            Sd: 50K

            anything on top of that, may be few ppl have parents insurance.

            Now my concern here is that, person who is in 30% bracket as per old, so if he or she can get any benefit if choose the new tax regimen.

            Kindly comment.

          • Sreekanth Reddy says:

            Dear Mihir,
            In the new tax regime, there wont be any tax deductions available (except some like Sec 87A, LTA, gratuity etc.,)

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