Budget 2020:How New Tax Regime Will Impact Taxpayers?

To bring in more income in the hands of individuals and also to increase their purchasing power, FM on expected lines delivered Union Budget 2020.

Budget 2020:How New Tax Regime Will Impact Taxpayers?

There have now been introduced 5 tax slabs:

New proposed tax slabs are as though:

Tax slab	Current tax	Tax rate as per proposals in Budget 2020
Up to Rs. 5 lakh		No tax
Rs. 5 lakh- Rs. 7.5 lakh	20%	10%
Rs. 7.5 lakh to Rs. 10 lakh	20%	15%
Rs. 10 lakh to Rs. 12.5 lakh	30%	20%
Rs. 12.5 lakh - Rs. 15 lakh	30%	25%
Above Rs. 15 lakh	30%	30%

At the same time, some 70 tax exemptions have been withdrawn from the system. So, if the new tax regime is opted, taxpayers will not be offered deduction on home loan interest and principal repayment, section 80c rebate etc.

So, what shall we the exact impact on the taxpayer:

As per the finance minister, the individuals will be given an option to choose between the existing tax regime or new tax regime with slashed rate and slab but with no tax exemption. But through the new offered individuals will be able to save on their tax outgo for FY21.

Which will lower your tax go - new or old tax regime?

Solely this would depend on the individual's investments as well as sources of income and each individual will need to do his or her own calculation to simplify on this question at hand as the proposals in the Budget 2020 have been listed.

In the previous interim budget 2019, under Section 87A the rebate threshold limit was increased to Rs. 12500 and it accommodated individuals whose net taxable income did not exceeded Rs. 5 lakh.

So, say a person if he has insurance policies in his name, he would continue paying premium for them and would then also claim deductions on them as provided under Section 80C.

Further as now dividend tax as made applicable for those earning dividend income and withdrawn for the dividend distributing company, taxable income will saw a rise in the hands of investors, and it needs to be noted when all of the proposals are put together, will budget 2020 manage to provide any tax relief to taxpayers.

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