I discussing section 115 BAC of the Income Tax Act 1961, which has been introduced by the finance act 2020 with effect from the assessment year 2021-22. In the budget for the fiscal year 2021, Finance Minister Nirmala Sitharaman introduced the new income tax rates for taxpayers in India.
The finance minister said in her budget speech, that the current Income Tax Act is full of various exemptions and deductions that make compliance complicated and a burdensome process for the taxpayers. Though the removal of tax deductions and exemptions would make the compliance less serious.
Those who have maintained their financial portfolio to an avail tax deduction as per the old slab rates are likely to pay more tax under the new tax lapse. The budget 2020 introduces a new regime under Section 115 BAC giving an option to individuals and taxpayers to pay income tax at the lower rates.
The new system is applicable for income earned from first April 2020 which relates to the assessment year 2021-22. Now we’ll have a look at the new slab rates, which has been introduced by the finance act 2020 under the new slab rate :-
Income from rupees 2.5 lakhs to rupees five lakhs will be taxed at the rate of 5%
Come from rupees five lakhs to rupees 7.5 lakhs will be taxed at the rate of 10%
Income from up 7.5 to 10 lakhs will be taxed at 15%
Income from 10 to 12.5 lakhs will be taxed at 20%
Income from 12.5 to 15 lakhs will be taxed at 25%
And thereafter income of rupees 15 lakhs will be taxed at the rate of 30%.
The old slab rates remain as they were income from rupees 2.5 lakh to five lakh will be taxed at 5%
Income from five to 10 will be taxed at 20% and the income above rupees 10 lakhs will be taxed at the rate of 30%.
The new tax regime removes the claim for about 70 deductions and exemptions. The following are the deductions and exemptions which you cannot claim under the new tax system.
$ The standard deduction,
$ Professional Tax and entertainment allowance on salaries,
$ leaves travel allowance,
$ Minor child income allowance,
$ Helper allowance,
$ Children education allowance.
$ Other special allowances under Section 10 subsection 14
$ Interest on housing loan on the self occupied property or vacant property chapter six age deductions and deductions from family pension income.
The exemptions and deductions which are still available under the new regime are as follows
$ Transport allowances in case of a specially abled person.
$ Conveyance allowance received to meet the conveyance expenditure incurred as a part of employment
$ Any compensation received to meet the cost of travel on tour or transfer
$ Daily allowance received to meet the ordinary regular charges or the expenditure you incur on account of absence from regular place of duty.
The crux is that more than deductions you are claiming it is better to remain in the old regime. It is very unlikely that taxpayers who are availing all exemptions like provident fund school fees, life insurance.
Home Loan Repayment deductions for health insurance HRA for rent pay to the landlord interest on the loan for self-occupied residence and sector will get benefit from the new tax rate.
Now, there are some issues which are present in the new tax regime, which have been discussed under individual taxpayers have the choice to select between old and new tax rate and hence, to do the current selection, the taxpayer is required to first compute correct tax liability under both the tax rates and then only he can decide which is beneficial to him.
Does. The process of computing income tax liability for individual taxpayers is the most stressful and cumbersome. The salaried individual taxpayers who are subject to tedious are required to inform their employer at the beginning of the year about their preference of tax rates, and there is no option to change their preference during the financial year. Thus, these salary taxpayers have been imposed with an additional burden to be extra cautious.
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