New Income Tax Regime Vs Old Income Tax Regime
The Finance Minister introduced several proposals in relation to the personal tax regime in the Union Budget 2020 presented in the parliament on February 1, 2020.
The Budget 2020 introduced a new income tax regime for individual taxpayers. Bringing a revolutionary change in direct tax rates, Finance Minister Nirmala Sitharaman has proposed a new tax regime, under which new income tax slabs are introduced. This new Income Tax regime provides lower rate that could relief to Individual taxpayer. However there are conditions that you need to be aware:-
1) The New Tax Regime is optional. To put it simply, the assessee can choose between the New Tax Regime and the Old Tax Regime depending on what is best suitable from a tax planning point of view.
2) The proposed lower tax rates will be applicable only if you are willing to give up exemptions* and deductions** available under various provisions of the Income-tax Act, 1961.
3) Only the deduction under 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] can be claimed.
So, There is following Income Tax Rate under the New Tax Regime and Old tax Regime:-
|Income tax rate slabs (Rs)||Old Regime||New Regime|
|Up to 2.5 lakh||Nil||Nil|
|Above 15 lakh||30%||30%|
(Note: The above rates are subject to surcharge and cess, as applicable)
Since, No tax up to Rs. 500,000 taxable income, as Rebate under section 87A is available. Basic exemption income slab in case of a resident individual of the age of 60 years or more (senior citizen) and resident individual of the age of 80 years or more (very senior citizens) at any time during the previous year, continues to remain the same at Rs 3 lakh and Rs 5 lakh, respectively
* Exemption means such as Leave Travel Allowance (LTA), House Rent Allowance (HRA), etc
** Deduction available under chapter VI A of the Act that under Section 80 such as 80C, 80CCC, 80CCD,80D, 80DD, 80E, 80EE, 80G, 80GG, 80GGA, 80GGC, etc Even the Standard Deduction under Section 16 [which is currently Rs 50,000] available to salaried individuals and the deduction on home loan interest, under Section 24(b) will be disallowed
Brief description of exemption and deduction which is not in new regime
Here are some of the 70 exemptions and deductions you won’t get in new regime. Check which of these you have been claiming:-
Some 50 tax exemptions have been left untouched in the Budget. These include: