Budget 2021: How Budget 2020 changed Income Tax slabs

A taxpayer earning Rs 15 lakh will save Rs 78,000 in tax under the new regime, FM said in Budget 2020 speech.

January 22, 2021 / 12:11 PM IST
FM Nirmala Sitharaman

FM Nirmala Sitharaman

Finance Minister Nirmala Sitharaman, in Budget 2020, added three income tax slabs in the tax structure. In Budget 2020, FM Sitharaman tried to put more money in the hands of taxpayers by curtailing the incentives to save. A taxpayer earning Rs 15 lakh will save Rs 78,000 in tax under the new regime, FM said in Budget 2020 speech.

New income tax slabs and ratesNo change in tax exemption given to incomes up to Rs 5 lakh in interim.
Old rateAnnual IncomeNew rate
5%Upto Rs 2.5 lakhNIL
20%Rs 2.5 lakh - 5 lakh5%
20%Rs 5 lakh - 7.5 lakh10%
20%Rs 7.5 lakh - 10 lakh15%
30%10 lakh - 12.5 lakh20%
30%12.5 lakh - 15 lakh25%
30%Above 15 lakh30%

Under various sections of Chapter VI-A, this is without any deductions. If the taxpayer claims deductions for Rs 2.5 lakh (Rs 50,000 standard deduction, Rs 1.5 lakh under 80C and Rs 50,000 contribution to NPS), his tax will not change. If he also claims a house rent allowance (HRA) exemption or home loan interest deduction of Rs 2 lakh, his tax in the old regime would be lower by Rs 46,800.

Under chapter VI-A, salaried taxpayers who opt for the new regime will have to forgo the standard deduction as well as the exemptions, including the HRA. Medical insurance premium and even the leave travel allowance which is tax free if claimed once in a block of two years investment under Section 80C.

Some of the exemptions and deductions you won’t get in new regime

-Section 80C investments -House rent allowance -Housing loan interest -Leave travel allowance -Medical insurance premium -Standard deduction -Savings bank interest

-Education loan interest

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Some 50 tax exemptions have been left untouched. These include.

-Standard deduction on rent -Agricultural income -Income from life insurance -Retrenchment compensation -VRS proceeds

-Leave encashment on retirement

Taxpayers have the to switch to the new tax structure depending on their financial situation. Taxpayers who avail several exemptions and deductions such as house rent allowance and 80C deductions may not benefit from switching to the new system.

Taxpayers with income between Rs 50 lakh and Rs 1 crore continue to pay 10 percent surcharge on the tax. The surcharge is 15 percent for income between Rs 1 crore and Rs 2 crore, 25 percent for between Rs 2 crore and Rs 5 crore and 37 percent for income over RS 5 crore.

Here is how the new tax regime will affect the tax outgo of taxpayers at different income levels.

Income: Rs 15 lakh
Sr noOld regime (Without deductions)Old regime (With deductions)New regime
IncomeRs 15 lakhRs 15 lakhRs 15 lakh
Deductions/exemptionsNilRs 2,00,000Nil
Taxable incomeRs 15,00,000Rs 13,00,000Rs 15,00,000
TaxRs 2,62,500Rs 2,02,5001,87,500
Cess @ 4%10,500Rs 8,100Rs 7,500
Total taxRs 2,73,000Rs 2,10,600Rs 1,95,000
Income: Rs 30 lakh
Sr noOld regime (Without deductions)Old regime (With deductions)New regime
IncomeRs 30 lakhRs 30 lakhRs 30 lakh
Deductions/exemptionsNilRs 4,25,000Nil
Taxable incomeRs 30,00,000Rs 25,75,000Rs 30,00,000
TaxRs 7,12,500Rs 5,85,0006,37,500
Cess @ 4%28,500Rs 23,400Rs 25,500
Total taxRs 7,41,000Rs 6,08,400Rs 6,63,000
Income: Rs 60 lakh
Sr noOld regime (Without deductions)Old regime (With deductions)New regime
IncomeRs 60 lakhRs 60 lakhRs 60 lakh
Deductions/exemptionsNilRs 4,25,000Nil
Taxable incomeRs 60,00,000Rs 55,75,000Rs 60,00,000
SurchargeRs 1,61,250Rs 1,48,5001,53,750
Cess @ 4%Rs 70,950Rs 65,340Rs 67,650
Total taxRs 18,44,700Rs 16,98,840Rs 17,58,900
Income: Rs 1.2 crore
Sr noOld regime (Without deductions)Old regime (With deductions)New regime
IncomeRs 1.2 croreRs 1.2 croreRs 1.2 crore
Deductions/exemptionsNilRs 4,25,000Nil
Taxable incomeRs 1,20,00,000Rs 1,15,75,000Rs 1,20,00,000
SurchargeRs 5,11,875Rs 4,92,7505,00,625
Cess @ 4%Rs 1,56,975Rs 1,51,110Rs 1,53,525
Total taxRs 40,81,350Rs 39,28,860Rs 39,91,650
TaxRs 39,24,375Rs 4,92,750Rs 5,00,625
 
Moneycontrol News
first published: Jan 22, 2021 12:11 pm

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