The finance minister has introduced the new tax regime in the budget 2020 and new tax slabs have been declared for the income taxpayers. The new tax rates have updated intending to simplify the tax process and to extend the significant relief to the taxpayers. As per the new tax slabs, income tax rates are significantly reduced for the individual taxpayer who wants to forgo all the exemptions and deductions.
Let’s take a look at the current tax slabs along with rates here:
Income Tax Rates for the FY 2020-21 & AY 2021-22
Taxable Income Range | Existing Tax Rate | New Tax Rate |
0 to 2.5 lakh | Exempted from tax | Exempted from tax |
2.5 to 5 lakh | 5% | 5% |
5 to 7.5 lakh | 20% | 10% |
7.5 to 10 lakh | 20% | 15% |
10 to 12.5 lakh | 30% | 20% |
12.5 to 15 lakh | 30% | 25% |
Above 15 lakh | 30% | 30% |
Note: If senior citizens and super senior citizens opt new tax regime then the benefit of the higher exemption limit would not be available.
Surcharge:
- 10% of Income tax where total income exceeds Rs.50 lakh
- 15% of Income tax where total income exceeds Rs.1 crore
- 25% of Income tax where total income exceeds Rs.2 crore
- 37% of Income tax where total income exceeds Rs.5 crore
Note: Enhanced Surcharge rate (25% or 37%) is not applicable in case of specified incomes I.e. short-term capital gain u/s 111A, long-term capital gain u/s 112A & short-term or long-term capital gain u/s 115AD(1)(b).
Education cess: 4% of income tax plus surcharge
Note: A resident individual is entitled to rebate under section 87A if his total income does not exceed Rs. 5,00,000. The amount of rebate shall be 100% of income-tax or Rs. 12,500, whichever is less. rebate under section 87A is available in both scheme I.e. existing scheme as well as the new scheme.
Important points to consider for the new tax rates
However, it has been clarified by the government that the new tax regime is optional to adopt, and the conventional income tax slabs with higher tax rates will continue to exist. The taxpayers must fulfill the mentioned conditions in order to avail of the benefit of the new tax regime.
According to the speech delivered by our finance minister, a taxpayer with an income of Rs. 15 lakh has to pay a tax of 2,73,000, if he doesn’t avail of any deduction under the old regime. Now as per the new regime, he has to pay only 1,95,000 as per income tax, which is near about 78,000 lesser.
On the other hand, taxpayers who continue with the existing tax regime would continue to pay tax according to their income the same as for the previous year 2019-20.
In keeping with the new tax regime, it is highlighted that it will not cover popular exemptions and deductions such as House Rent Allowance (HRA), Leave Travel Allowance (LTA), standard deduction, interest paid on the home loan, under Chapter VI A other than 80CCD(2) and 80JJAA, and so forth.
If senior citizens and super senior citizens opt new tax regime then the benefit of the higher exemption limit would not be available.
As per the new tax regime, the procedures of pre-fill the income tax returns would be introduced so that the taxpayers don’t need the assistance of professionals to pay income tax.
Frequently Asked Questions
1. How to calculate tax liability?
The calculation of tax liability is done on the income arrived after availing all the deductions and other tax-exemptions which are available to the individual.
2. How is total income calculated?
For calculating the total income, you have to add the income received from various sources like salary, interest received from the fixed deposit, pension, recurring deposit, and, savings account, etc.
3. How to know the tax payment details?
Once the tax has been deposited by you or any other person who is deducting tax and depositing on your behalf with the government then the total amount of tax deposited against your PAN would be reflecting in Form 26AS. Now for your convenience, you can download the statement of payment details from your account on the income tax e-filing website.
4. How to pay taxes?
A taxpayer has two options whether he can pay tax offline or online. For paying tax by the offline method, an individual has to visit the bank branch and pay the due taxable amount along with duly filled challan. Along with that, taxes can be paid online also by using the Debit card/Net banking facility of any of the authorized banks.
Overall if we see then we would find that amendments made in the Union Budget 2020 are beneficial for all the taxpayers.
If you are looking for any further insights into the Budget 2020 or income tax return then you may directly reach out to us.
