Union Budget 2020-21 Expectations for Income Tax: In the final 12 months’s Union Budget, Finance Minister Nirmala Sitharaman had launched a brand new income tax regime that accommodates seven tax slabs – Nil, 5 per cent, 10 per cent, 15 per cent, 20 per cent, 25 per cent and 30 per cent – compared to 4 tax slabs underneath the old income tax regime – Nil, 5 per cent, 20 per cent and 30 per cent.
Both the tax regimes will proceed and it will likely be non-compulsory for the taxpayers to decide on a regime, Sitharaman declared in her finances speech.
Although, the new income tax regime has decrease tax charges on income between Rs 5 lakh to Rs 15 lakh, however no tax exemptions and deductions will probably be accessible in the regime.
As a end result, a salaried taxpayer would lose the present advantages of over Rs 5 lakh in the types of exemptions and deductions accessible underneath varied sections in the old income tax regime by switching to the new income tax regime.
“I have to pay additional tax of over Rs 1 lakh if the old income tax regime is discontinued,” mentioned Saral Dev (title modified), who’s a authorities worker and had taken dwelling mortgage to buy a flat in 2019.
Under the old income tax regime, taxpayers get a deduction as much as Rs 2 lakh u/s 24 of the Income Tax Act on curiosity paid on dwelling mortgage in a monetary 12 months. Moreover, a further tax advantage of as much as Rs 1.5 lakh can be accessible u/s 80EEA of the Income Tax Act, if the curiosity is paid on dwelling mortgage taken to buy an reasonably priced dwelling, topic to some situations.
Apart from the curiosity on dwelling mortgage, a standard salaried taxpayer would additionally lose the advantages of HRA exemption, Standard Deduction, which was Rs 50,000 in the Financial Year (FY) 2019-20, deductions u/s 80C as much as Rs 1.5 lakh, deduction as much as Rs 50,000 u/s 80CCD(1B) on voluntary contributions to Tier-1 Accounts of National Pension System (NPS), deductions as much as Rs 75,000 u/s 80D on medical health insurance premium paid for self and household, in addition to the premium paid for senior citizen mother and father or bills incurred on their therapy.
“Last year the new income tax regime was optional and I hope it will not become mandatory,” mentioned Saral.
So, taxpayers hope that the Finance Minister will proceed with the old income tax regime as an non-compulsory one this 12 months and in future as properly.