Budget 2020 has proposed to present new annual tax slabs with decreased rates for those prior exclusions and derivations under a "simplified tax regime". This new framework is discretionary and will coincide with the old one with three slabs and different exclusions and reasoning accessible to the taxpayer.As per the budget proposals, if a taxpayer opts for the new regime, then his income will be taxed as per the following tax slabs:
People those who are having net taxable income of up to Rs 5 lakhs will be able to avail tax return of Rs 12,500 under section 87A in both, the existing and new, tax regimes. Effectively, this would mean that taxpayers having net taxable income of up to Rs 5 lakhs will carry on paying zero tax.
However, people opting for the new tax regime would not be able to take advantage of common tax breaks such deductions under section 80C for maximum of Rs 1.5 lakhs by investing in specified instruments, section 80D for medical insurance paid, house rent allowance, leave travel allowance etc.
On the other hand, people opting for the existing tax regime
will continue to pay tax on their income in FY 2020-21 same as FY 2019-20.
These tax proposals will come into effect from April 1, 2020, once these are
passed by the Parliament.
The basic tax exemption limit for a person depends on their age and residential status. According to age, resident people taxpayers are divided into three categories:
1. Residents below the age of 60 years
2. Senior Citizens above the age of 60 but below 80
3. Super senior Citizens above the age of 80
As per the Budget 2019 announcement, no changes in the income tax slabs and rates have been planned. A rebate of Rs 12,500 will be available for all taxpayers with taxable income up to Rs 5 lakhs. This rebate will be available under Section 87A of the Income Tax Act. Also, standard deduction for financial year 2019-20 would be Rs 50,000.
As per the current income tax slabs, taxation of income of
resident people below 60 years is as follows: Income up to Rs 2.5 lakhs is
exempted from tax, 5 percent tax on income between Rs 250,001 to Rs 5 lakhs; 20
per cent tax on income between Rs 500,001 and Rs 10 lakhs; and 30 per cent tax
on income above Rs 10 lakhs.
For senior citizens (aged 60 years or above but less than 80 years), income up to Rs 3 lakhs is exempt from tax. Income from Rs 300,001 to Rs 5 lakhs is taxed at 5 per cent, from Rs 500,001 to Rs 10 lakhs at 20 per cent and above Rs 10 lakhs at 30 per cent.
For super senior citizens, aged 80 years and above, income up to Rs 5 lakhs is exempt from tax. Income from Rs 500,001 to Rs 10 lakhs is taxed at 20 per cent and above Rs 10 lakhs is taxed at 30 per cent.