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.
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);
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.)
- New Income Tax Slab Rates Vs Old Tax Regime | Which one is better?
- Income Tax Deductions List FY 2019-20 | List of important Income Tax Exemptions for AY 2020-21
- Income Tax Exemption Vs Tax Deduction Vs Tax Rebate Vs TDS | Key Differences
- How Income Tax Department tracks the High Value Financial Transactions?
- Income Tax Slab Rates for FY 2019-20 / AY 2020-21
(Image courtesy of Stuart Miles at FreeDigitalPhotos.net) (Post first published on 01-February-2020)