How To Calculate Income Tax For Assessment Year 2020-21

How To Calculate Income Tax For Assessment Year 2020-21

From the announcement of a full tax rebate on an annual income up to Rs. 5 lakh to a 25 per cent hike in standard deduction applicable to the salaried and pensioners, the Budget 2019 proposes few key changes to income tax laws. Once the new income tax rules come into effect, that is, from Assessment Year 2020-21, individual assessees’ tax outgo will change accordingly. Financial experts have shared few examples to explain the changes in income tax liability as per the proposed changes in laws.

But before that, here’s a brief description of two noteworthy changes in income tax laws proposed in the February 1 Budget:

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  • Full tax rebate on annual personal income up to Rs. 5 lakh; in other cases, income tax rates/slabs remain unchanged
  • Standard deduction limit (applicable to employees and pensioners) raised from Rs. 40,000 (Budget 2018) to Rs. 50,000 (Budget 2019)

Here are some of those examples underlining the changes in income tax liability from assessment year 2020-21:

Budget 2019 tax calculation examples
Taxable annual income in rupees (after adjusting deductions) 3,50,000 4,00,000 5,00,000 10,00,000
Tax 5,000 (@ 5% on 1,00,000) 7,500 (@ 5% on 1,50,000) 12,500 (@ 5% on 2,50,000) 1,12,500 (@5% on 2,50,000, 20% on 5,00,000)
Rebate under Section 87A of I-T Act 5,000 7,500 12,500 NA
Tax liability 0 0 0 1,12,500
Cess @ 4% 0 0 0 4,500
Tax payable (after cess) 0 0 0 1,17,000
Budget 2018 examples
Taxable income 3,50,000 4,00,000 5,00,000 10,00,000
Tax 5,000 7,500 12,500 1,12,500
Rebate 2,500 NA NA NA
Balance Tax 2,500 7,500 12,500 1,12,500
Cess 100 300 500 4,500
Tax payable 2,600 7,800 13,000 1,17,000

 

Source:- ndtv

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