Government has come up with new scheme of tax for Individuals in the Budget 2020, which will be applicable from the Tax return of F.Y. 2020-21.

Who can opt for the scheme?

The Individuals and HUFs who does not have any Business income can opt for New Scheme.

Points of difference between both schemes:

1. Rate of Tax –

Income Old Scheme New Scheme
     
0 – 2,50,000 NIL NIL
2,50,001 – 5,00,000 5% 5%
5,00,001 – 7,50,000 20% 10%
7,50,001 – 10,00,000 20% 15%
10,00,001 – 12,50,000 30% 20%
12,50,001 – 15,00,000 30% 25%
15,00,001 or More 30% 30%

2. Allowance of Tax Deductible Investment –

Old Scheme New Scheme
   
All Tax Deductible Investment allowed as Deduction for Calculation of Tax No Deduction allowed
Like – PPF, LIC, NPS etc.  

Income tax Calculation for both Schemes:

Ex. 1 – With Less Tax deductible Investment

Mr. Amit has income of 18,00,000/- from Salary.

He made some Investments as follows-

1. PPF – 1,00,000

2. NPS – 50,000

3. Mediclaim Premium – 20,000

Particulars Old Scheme (A) New Scheme (B) Difference Amount (A-B)
Total Income 18,00,000 18,00,000
Less:
PPF 1,00,000 0 1,00,000
NPS 50,000 0 50,000
Mediclaim Premium 20,000 0 20,000
Net Taxable Income 16,30,000 18,00,000 1,70,000
Tax Calculation:
0 – 2,50,000 0 0 0
2,50,001 – 5,00,000 12,500 12,500 0
5,00,001 – 7,50,000 50,000 25,000 25,000
7,50,001 – 10,00,000 50,000 37,500 12,500
10,00,001 – 12,50,000 75,000 50,000 25,000
12,50,001 – 15,00,000 75,000 62,500 12,500
15,00,001 or More 39,000 90,000 (51,000)
Tax Payable 3,01,500 2,77,500 24,000

As per above example by selecting new scheme you can save Tax of Rs.24,000/-.

Ex. 2 – With More Tax Deductible Investment

Mr. Amit has income of 18,00,000/- from Salary.

He made some Investments as follows-

1. PPF – 1,00,000

2. NPS – 50,000

3. Mediclaim Premium – 20,000

4. House Loan Interest – 2,00,000

Particulars Old Scheme (A) New Scheme (B) Difference Amount (A-B)
Total Income 18,00,000 18,00,000
Less:
PPF 1,00,000 0 1,00,000
NPS 50,000 0 50,000
Mediclaim Premium 20,000 0 20,000
House Loan Interest 2,00,000 0 2,00,000
Net Taxable Income 14,30,000 18,00,000 3,70,000
Tax Calculation:
0 – 2,50,000 0 0 0
2,50,001 – 5,00,000 12,500 12,500 0
5,00,001 – 7,50,000 50,000 25,000 25,000
7,50,001 – 10,00,000 50,000 37,500 12,500
10,00,001 – 12,50,000 75,000 50,000 25,000
12,50,001 – 15,00,000 54,000 62,500 (8,500)
15,00,001 or More 0 90,000 (90,000)
Tax Payable 2,41,500 2,77,500 36,000

As per above example by selecting new scheme you can save Tax of Rs.36,000/-.

As per the above Examples we can conclude that:

1. If your Tax Deductible Investments are More – Select Old Scheme

2. If your Tax Deductible Investments are Less – Select New Scheme

How to Compare the Tax Benefit for both the Schemes:

Any individual Person can compare their tax benefit from both schemes by following below mentioned Steps:

1. Go to https://www.incometaxindiaefiling.gov.in

2. Select “Tax Calculator FY 2020-21

3. Select your age from Drop Down

4. Fill the data of your Income and Deduction

5. Click on button “Compare Tax under Existing and New Regime”

Author Bio

Qualification: CA in Job / Business
Company: SSBI exports
Location: Ahmedabad, Gujarat, IN
Member Since: 01 May 2020 | Total Posts: 3

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