So the Union Budget 2020 has led to so many expectations (positive of course) for all the tax assessees in terms of one of the basic amendment- the main one for which we all were waiting for since every-time I guess…

Changes in Income Tax Slab rates

So here comes the New slab for Individuals * but with certain T&C (of course)-

But before discussing the slab rates I think we all must know certain important points regarding the same.

a) This slab is for INDIVIDUAL only.

b) This slab is OPTIONAL.

c) The people opting this slab shall not be entitled to around 70 deductions and exemptions (BIG LOSS)

d) Option to be exercised on or before due date of ITR filing for AY 2021-22. (BE FAST IN CALCULATING)

e) Assessees having Business income shall have the option to withdraw from the new slab only for once. (PLEASE THINK BEFORE OPTING)

f) Only 2 deductions are allowed-  Section 80CCD(2) [i.e., employer’s contribution on account of an employee in a notified pension scheme] and Section 80JJAA [i.e. for new employment] 

Now we shall discuss the rates offered by New Slab and compare the same with old rates-

Income slabs (Rs) Tax Rate (Old Regime) Tax Rate (New Regime – devoid of exemptions & deductions)
Up to 2.5 lakh Nil Nil
2.5-5 lakh 5% 5%
5-7.5 lakh 20% 10%
7.5-10 lakh 20% 15%
10-12.5 lakh 30% 20%
12.5-15 lakh 30% 25%
Above 15 lakh 30% 30%

Now the most important question arises- Which one to choose??

Lets take an example for better understanding-

Example No.1-

Particulars

Old Tax Regime (Rs)

New Tax Regime (Rs)

Gross Income

1,200,000

1,200,000

Deductions:

   

U/Sec: 80C

150,000

U/Sec: 80D

25,000

U/Sec: 24(b)

75,000

Taxable Income

950,000

1,200,000

Tax Slab (OLD)

   

0 to 2.5 Lakh

2.5 to 5 Lakh @ 5%

12,500

5 Lakh to 10 Lakh @ 20%

90,000

> 10 Lakh @ 30%

Tax Slab (NEW)

   

0 to 5 Lakh

2.5 to 5 Lakh @ 5%

12,500

5 to 7.5 Lakh @ 10%

25,000

7.5 Lakh to 10 Lakh @ 15%

37,500

10 Lakh to 12.5 Lakh @ 20%

40,000

12.5 Lakh to 15 Lakh @ 25%

> 15 Lakh @ 30%

Income Tax

102,500

115,000

Cess @ 4%

4,100

4,600

Total Tax payable

106,600

119,600

Example No.2-

Particulars

Old Tax Regime (Rs)

New Tax Regime (Rs)

Gross Income

700000

700000

Deductions:

   

U/Sec: 80C

150,000

U/Sec: 80D

25,000

U/Sec: 24(b)

75,000

Taxable Income

450000

700000

Tax Slab (OLD)

   

0 to 2.5 Lakh

2.5 to 5 Lakh @ 5%

10000

5 Lakh to 10 Lakh @ 20%

> 10 Lakh @ 30%

Tax Slab (NEW)

   

0 to 5 Lakh

2.5 to 5 Lakh @ 5%

12,500

5 to 7.5 Lakh @ 10%

20000

7.5 Lakh to 10 Lakh @ 15%

 

10 Lakh to 12.5 Lakh @ 20%

12.5 Lakh to 15 Lakh @ 25%

> 15 Lakh @ 30%

Income Tax

10000

32500

Cess @ 4%

400

1300

Total Tax Outgo

10400

33800

Example No.3-

Particulars

Old Tax Regime (Rs)

New Tax Regime (Rs)

Gross Income

500000

500000

Deductions:

   

U/Sec: 80C

U/Sec: 80D

U/Sec: 24(b)

Taxable Income

500000

500000

Tax Slab (OLD)

   

0 to 2.5 Lakh

2.5 to 5 Lakh @ 5%

12,500

5 Lakh to 10 Lakh @ 20%

> 10 Lakh @ 30%

Tax Slab (NEW)

   

0 to 5 Lakh

2.5 to 5 Lakh @ 5%

12,500

5 to 7.5 Lakh @ 10%

7.5 Lakh to 10 Lakh @ 15%

10 Lakh to 12.5 Lakh @ 20%

12.5 Lakh to 15 Lakh @ 25%

> 15 Lakh @ 30%

Income Tax

12,500

12,500

Cess @ 4%

5,00

5,00

Total Tax Outgo

13,000

13,000

So basically it seems that if we are falling in high income group and have invested in Tax saving schemes then we should clearly go for Old slab.

While for individuals in the middle-income group, earning a gross income of say Rs 4-5 lakh; the new regime may prove advantageous. (with no deductions and tax savings available)

If you are looking to fulfill your financial obligations, namely – wealth creation through investments in tax-saving instruments; paying premiums to address insurance needs (life and health); paying children’s tuition fees; paying Equated Monthly Installments (EMIs) of an education loan; buying a house with a home loan; and so on, the older regime still works in the interest of your financial well being.

I hope this reading will be useful for you.

Author Bio

Qualification: CA in Practice
Company: APMT & ASSOCIATES
Location: New Delhi, New Delhi, IN
Member Since: 27 Jun 2018 | Total Posts: 4

My Published Posts

More Under Income Tax

9 Comments

  1. jayarama says:

    Does New scheme of Slab rates for F y-2020-21 applicable to senior citizens (i.e., >60 years) and Super Senior citizens (i.e., > 80 years)

  2. CA Devesh Thakur says:

    I guess there is some clerical mistake while explaining the new slab in your examples. Under income tax calculation as per new slab 1st slab would be Upto Rs.2.5Lakh Nil instead of up to Rs5 lakh NIL.

  3. Lakshmana Naidu Gopal says:

    Hi.

    Very informative details; I think in both the cases Rs.12500 can be availed U/S 87 A. if the taxable income is below Rs.5lacs.

Leave a Comment

Your email address will not be published. Required fields are marked *

Search Posts by Date

October 2020
M T W T F S S
 1234
567891011
12131415161718
19202122232425
262728293031