If a person wants to pay taxes as per the 2020’s income tax rates, then they will have to forego all their exemptions. For people who don’t want to leave their exemptions, they can pay taxes as per the old tax regime. The finance minister has allowed people to pick between the new regime and the old regime. However, cess and surcharge have not changed.
New Tax Slabs 2020
|Tax Slab||Old Tax Regime||New Tax Regime|
|Up to Rs. 2,50,000||Nil||Nil|
|From Rs. 2,50,000 - 5,00,000||5%||5%|
|From Rs. 5,00,000 - 7,50,000||20%||10%|
|From Rs. 7,50,000 - 10,00,000||20%||15%|
|From Rs. 10,00,000 - 12,50,000||30%||20%|
|From Rs. 12,50,000 - 15,00,000||30%||25%|
|Above Rs. 15,00,000||30%||30%|
- People earning salaries up to Rs. 5,00,000 don’t have to pay any tax. If a person’s taxable income is Rs. 5,00,000, then they can get a tax rebate of Rs. 12,500. The rebate is allowed for the old regime as well as the new regime.
- For people earning above Rs. 5,00,000, their tax slab rates start from Rs. 2,50,000.
- People in the salary group between Rs. 5,00,000 and Rs. 7,50,000 must pay 10% tax, with the old regime, they must pay 20%.
- Salary group between Rs. 7,50,000 and Rs. 10,00,000 must pay 15%. In the old regime, the tax rate was 20%.
- For the ones who are earning between Rs. 10,00,000 and Rs. 12,50,000, they must pay 20% tax. However, with the old regime, they must pay 30%.
- People earning between Rs. 12,50,000 and Rs.15,00,000 will have to pay 25% tax. Meanwhile, the old tax regime has a tax rate of 30%.
- The tax rate has not changed for people earning salaries above Rs.15,00,000.
Some of them are-
- Standard deduction of Rs. 50,000 for people earning salaries.
- House rent allowance.
- Leave travel allowance.
- Taxpayers can’t claim 80TTA (Interest on deposits in savings account deduction) and 80TTB (Interest on deposits to senior citizens deduction).
- Entertainment allowance deduction (for government employees) and employment/professional tax.
- 80C deductions such as life insurance, school fee for children, PF contributions, ELSS, PPF, NPS, etc.
- 80D deductions such as medical insurance premium.
- 80DD and 80DDB tax deductions for disability.
- Tax break on Section 80G for donations to charities can’t be claimed.
- People going for the new regime can’t claim for deductions under many sections such as 80C, 80CCD, 80CCC, 80D, 80DDB, 80E, 80EEA, 80EE, 80G, 80GGA, 80GG, 80GGC, 80IA, 80-IAC, 80-IAB, 80-IBA, 80-IB, etc.
- People below 60 years of age. (tax exemption limit is Rs. 2,50,000)
- People between 60 to 80 years of age. (tax exemption limit is Rs. 3,00,000)
- People above 80 years of age. (tax exemption limit is Rs. 5,00,000)
People in the category of 60 to 80 years of age and above 80 years of age must decide which tax regime is better for them. Higher exemption limit is not a part of the new regime. The minimum exemption limit for every category is Rs. 2,50,000.
The finance minister has allowed both the old and the new regime to co-exist. Hence, a taxpayer must evaluate which tax regime is better for them. A person should know the income earned in a year and be aware of the exemptions and deductions that can be filed. If they do not have many exemptions, then opting for new tax regime can be more beneficial in terms of tax-saving.
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The information contained herein is generic in nature and is meant for educational purposes only. Nothing here is to be construed as an investment or financial or taxation advice nor to be considered as an invitation or solicitation or advertisement for any financial product. Readers are advised to exercise discretion and should seek independent professional advice prior to making any investment decision in relation to any financial product. Aditya Birla Capital Group is not liable for any decision arising out of the use of this information.
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