NEW TAX REGIME
Finance Bill 2020, gives an opportunity to Individuals, HUF, Business owners, and/or Professionals for concessional rates of taxes for Financial Year 2020-21. However, this concession will be applicable with certain terms and conditions.
Let’s first see the Concessional Tax Rates as follows –
|Annual Income in Financial Year 2020-21||New Income Tax Slab Rate|
|Nil to Rs.250,000||Exempt|
|Above Rs.250,000 upto Rs.500,000||5%|
|Above Rs.500,000 upto Rs.750,000||10%|
|Above Rs.750,000 upto Rs.1,000,000||15%|
|Above Rs.1,000,000 upto Rs.1,250,000||20%|
|Above Rs.1,250,000 upto Rs.1,500,000||25%|
Please note the following Points –
1. The new tax regime is “OPTIONAL”.
2. Salaried employees are allowed to switch between new and old tax regimes year to year, but this option is not available to business owners or professionals. They have to permanently fix any one of the tax regimes for the future years. They don’t have an option to switch year to year.
3. To claim taxes under the new Tax Regime, few deductions are not available and they should not be claimed while filing ITR. (List is given below.)
4. However, few deductions are still allowed under the new Tax Regime. (List is given below.)
List of deductions that cannot be claimed under New Tax Regime –
1. Deductions and/or exemptions in respect of allowances and perquisites like house rent allowance, professional tax, etc.
2. Deductions under Chapter VI A such as PF, PPF, Mediclaim, Repayment of housing loan, donations, etc.
3. Deductions under section 35 / 35AD / 35CCC
4. Depreciation cannot be claimed under section 32 of the Income Tax Act, 1961
5. Deduction under section 24(b) i.e. interest on repayment of housing loan
6. Deduction under section 57(iia) i.e. Family Pension
7. Set off losses from earlier assessment years are not allowed from now onwards.
List of deductions that are still allowed in New Tax Regime –
1. The daily allowance is given by the employers under certain conditions.
2. Any allowance for the cost of travel or transfer.
3. Transport allowance given for handicapped.
Deduction in respect of contribution to Pension Account.