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| Income Tax |
We all know that there has been New Taxation policies presented in this Union Budget 2020 and we all know, that this would impact us. This is also known as - the New Tax Regime. So there is a New Tax Regime and the existing one is simply referred as Old Tax Regime.
But, we do have all sort of questions like
Which one is better, the old tax regime or the new tax regime?
Which one to choose? How to save maximum taxes?
How much financially are we impacted?
How to minimize tax outflow and save more?
What is new in Union Budget 2020 for salaried employees:
There are reforms in tax assessment along with lower tax rates as per Union Budget 2020. Its offering relief to individual tax payers as per the new proposal along with certain conditions which you need to be aware of to make best use of the new proposals. So compare for yourself and find it out.
New Tax Rates
The Budget has proposed a New Tax Regime along with existing Old Tax Regime and this new tax regime is optional to people.
What does this mean?
Simply put, the taxpayer can choose between the old tax regime and the new tax regime depending on what is beneficial to him/her from taxation point of view. You can choose anyone and save maximum whatever is possible.
The new tax regime is applicable with none of the tax deductions in 80C, 80D etc. eligible. So, prima facie this looks like you might need to pay extra taxes (basis no deductions meaning seemingly higher salary). However, under few conditions, the new tax regime might be beneficial especially for lower tax bracket people.
The New Tax Regime has proposed lower and different tax slabs for income segments upto Rs. 15 lakhs. But this is applicable only, when you do not avail any of the exemptions and deductions available under Income Tax Act provisions.
What are those tax provisions which you need to forgo?
If you choose the New Tax Regime, then you CANNOT avail exemptions like -
Standard Deduction under Section 16 - Remember the Rs 50,000 available to salaried individuals
Home Loan interest deduction under section 24(b)
LTA - Leave Travel Allowance
HRA - House Rent Allowance
and deductions available under Chapter VI A of the Income Tax Act such as
Section 80 - 80C, 80D, 80CCC, 80CCD, 80E, 80G, 80GG, 80GGA, 80GGC, 80DD etc.
In the next tax regime, around 70+ exemptions and deductions have been removed.
Any exception to these deductions for the New Tax Regime?
Yes, you can still claim - the deductions under Section 80CCD(2) - employer’s contribution on account of an employee in a notified pension scheme and Section 80JJAA which is for new employment.
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