Income Tax Budget 2020 Highlights: Revised Income Tax Slabs, New Tax Regime & Changes – PDF Download

FM announces new income tax slabs/rates, tweaks exemption structure. Cuts tax rate for those in the Rs 5-15 lakh tax bracket.

Income Tax Budget 2020 introduced in Parliament. The Budget proposes the creation of new income tax regime to simplify the process of calculating the tax on personal income. Along with it, the Union Budget 2020-21 removes as well as introduces various taxes along with amending the Income Tax Act, 1961. Have a look at the key taxation reforms introduced in Budget 2020 along with revised and new income tax rates or slabs and other key changes in the taxation system. Also, PDF Download Union Budget 2020 document here including the Financial Bill.

Key takeaways:
– To introduce a new simplified personal tax regime
– No income tax for income up to Rs 5 lakh
– 10% income tax for those earning between Rs 5 lakh to Rs 7.5 lakh versus 20% earlier

The Union Budget 2020 is finally tabled in the Parliament to restore the Indian Economy by laying out a clear and straightforward roadmap to make India a USD 5 trillion economy by 2025, the dream of Prime Minister Narendra Modi. The Budget 2020 restructures the income tax slabs and announces various taxation reforms for the welfare of taxpayers. Get here all details of revised income tax rates and major taxation reforms announced in the Budget 2020 by FM Nirmala Sitharaman.

Budget 2020 is focused on boosting income and enhancing the purchasing power of people. The budget proposes some effective income tax reforms and changes to accelerate the growth of the Indian Economy and bring it back to the track. Though the Government undertook several initiatives in 2019-20 to revive the economy such as corporate tax rate cut, no progress was witnessed in terms of the revival of growth rate or market slump.

It is highly expected that the Income Tax Budget 2020 would offer some key changes and reforms in the Indian Taxation System to spur investments and growth. These measures could be lessened personal income taxes, increase in basic exemption limit, a restructured tax rate structure among others. Have a look at the details of Income Tax Budget 2020-21 below:

Expenditure & Revenue: The Budget mentions the Revised Estimates of expenditure to Rs 26.99 lakh crore for 2019-20  and Revenue Receipts of Rs 19.22 lakh crore.

Direct Tax

Corporate Tax Rate reduced to 15% for new mfg companies and to 22% for existing companies, the lowest in the world.

The net market borrowings for 2020-21 are fixed at Rs 5.36 lakh crore.

New Tax Regime announced: Simplified Personal Income Tax regime proposed in the Budget 2020. Have a look at the new income tax rates:

Up to 5 lakh Income: 0%

From 5 lakh to 7.5 lakh: 10%

From 10 Lakh to 12.5 lakh: 20%

From 12.5 lakh to Rs 15 Lakh: 25%

Beyond Rs 15 Lakh: 30% (No Change)

However, people who want to follow the old Income Tax Regime with exemptions can continue to do so

Previous & Revised Income Tax Slabs

Income Slab  Income Tax Rate 2020-21 Income Tax Rate 2019-20
Up to Rs 5 lakh Nil Nil
Rs 5 to Rs 7.5 lakh 10% 20%
Rs 7.5 to Rs 10 lakh 15% 20%
Rs 10 to Rs 12.5 lakh 20% 30%
Rs 12.5 lakh to Rs 15 lakh 25% 30%
Over 15 lakh (No Change) 30% 30%

Amendment of Income Tax Act: Budget amends the Income Tax Act, 1961 to introduce ‘No Dispute, But Trust’ scheme to bring down the number of direct tax cases or disputes. At present, over 4.5 lakh direct tax cases are pending in appellate tribunals.

Removal of Dividend Distribution Tax – Considering that the companies were required to pay 15% DDT and additional surcharge on dividend paid to shareholders which increases the tax burden for investors, the Government proposes the removal of DDT Regime.

Cess & Duty

Customs duty on footwear and furniture will be increased.

Nominal Cess will be imposed on the import of medical equipment as these are now being made in India.

How Income Tax will be computed now?

Here we have taken cases of people with different income slabs to show you how the Income Tax will be computed now on the basis of revised Income Tax Slabs in Union Budget 2020. Have a look:

Particulars Mr. X

(in Rs)

Annual Income 15,00,000
Less: Standard Deduction 50,000
Less : Deduction under 80C 1,50,000
Less : HRA deduction 1,50,000
Gross Taxable Income (GTI) 11,50,000
Income Tax 2020-21 (In case of no deduction or exemption availed) 1,95, 000
Income Tax (As per previous tax slab 2019-20) 2,73,000

What you will lose if you opt for the reduced tax rates and new tax

Here’s a list of the main exemptions that tax payers will have to forgo if they opt for the new regime.

(i) Leave travel allowance exemption which is currently available to salaried employees twice in a block of four years

(ii) House rent allowance normally paid to salaried individuals as part of salary. This could be claimed as tax exempt upto certain specified limits if the individual was staying in rented accommodation

(iii) Standard deduction of Rs 50,000 currently available to salaried tax payers

(iv) Deduction for entertainment allowance and employment/professional tax as contained in section 16

(v) Tax benefit on interest paid on housing loan taken for a self occupied or vacant house property: Interest paid on housing loan for such a property could be claimed as a deduction from income from house property which resulted in a loss from house property (as the property was self/occupied or vacant). This loss could be set off against salary income thereby reducing the individuals’ taxable income and net tax liability. This comes under section 24

(vi) Deduction of Rs 15000 allowed from family pension under clause (iia) of section 57

(vii) The most commonly claimed deductions under section 80C will also go. This includes the commonly availed section 80C deductions claimed for provident fund contributions, life insurance premium, school tuition fee for children and various specified investments such as ELSS, NPS, PPF etc.

However, deduction under sub-section (2) of section 80CCD (employer contribution on account of employee in notified pension scheme—mostly NPS) and section 80JJAA (for new employment) can still be claimed

(viii) The deduction claimed for medical insurance premium under section 80D will also not be claimable

(ix) Tax benefits for disability under sections 80DD and 80DDB will not be claimable

(x) Tax break on interest paid on education loan will not be claimable-section 80E

(xi) Tax break on donations to charitable institutions available under section 80G will not be available

All deductions under chapter VIA (like section 80C, 80CCC, 80CCD, 80D, 80DD, 80DDB, 80E, 80EE, 80EEA, 80EEB, 80G, 80GG, 80GGA, 80GGC, 80IA, 80-IAB, 80-IAC, 80-IB, 80-IBA, etc) will not be claimable by those opting for the new tax regime.


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