The new tax regime will be optional and the taxpayers will be given the choice to either remain in the old regime with exemptions and deductions or opt for the new reduced tax rate without those exemptions, she said in the Lok Sabha while unveiling the Budget 2020-21.
Under the proposal, people with an annual income of Rs 5 lakh to Rs 7.5 lakh will have to pay a reduced tax rate of 10 per cent; between Rs 7.5 lakh and Rs 10 lakh 15 per cent; between Rs 10 lakh and 12.5 lakh 20 per cent; between Rs 12.5 lakh and 15 lakh 25 per cent; and above Rs 15 lakh 30 per cent, she said.
The proposal would lead to a revenue sacrifice of Rs 40,000 crore per annum, she added. Individuals opting to pay tax under the new personal income tax regime will have to forgo almost all tax breaks they were claiming in the current tax structure. The important tax rebates that will not be available under the new regime include Section 80C (investments in PF, NPS, life insurance premiums), Section 80D (medical insurance premium), deduction on house rent allowance (HRA) and on interest paid on housing loan. Tax breaks for the disabled and for charitable donations also go. Therefore, it is not clear as to whether the new personal tax regime will really bring substantial tax savings for most.
The individuals will have to work out their liability under the old and new tax regime before deciding which one is more beneficial.
IMPORTANT REBATES
- The important rebates that won’t be available under new tax regime include Section 80C (investments in PF, NPS, life insurance premiums) Section 80D (medical insurance premium), deduction on HRA and on interest paid on housing loan
- Standard deduction of Rs50,000 currently available to salaried taxpayers
- Deduction for entertainment allowance and employment/ professional tax as contained in Section 16
- Tax benefit on interest paid on housing loan taken for a self-occupied property or vacant house property
- Tax breaks for the disabled and for charitable donations will also go
Taxpayers will have to forgo Following exemptions
- Leave travel allowance (LTA) exemption which is currently available to government employees twice in a block of four years
- Deduction of Rs15,000 allowed from family pension under clause (iia) of Section 57
- Deductions under Section 80C will also go. This includes provident fund contributions, life insurance premium, school tuition fee for children and various specified investments such as ELSS, NPS, PPF etc
- Deduction claimed for medical insurance premium under Section 80D will also not be claimable
- Tax benefits for disability under Sections 80DD and 80DDB will also not be claimable
- Tax breaks on donations to charitable institutions under Section 80G will also not be available
- The Finance Minister said the new regime will be optional and the people can continue with old regime if they desire so
- House rent allowance normally paid to salaried individuals as part of salary
- Standard deduction of Rs50,000 currently available to salaried taxpayers
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Deduction for entertainment allowance and employment/ professional tax as contained in Section 16…Read more>>
Source:-techiyogiz
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