All about the New Optional Income Tax Slabs: The Finance Bill, 2020
 |
| The Finance Bill, 2020 |
Apparently, it is good that new Income Tax Rates Slabs are introduced and minimum threshold for Income Tax levy is also increased.
But, the world is not as good as it seems.
The New Slabs are subject to many ' Notwithstanding' and 'provided that' clauses.
Now, first see the existing structure of Income Tax Slabs. Here we assumed that, as a prudent salaried person, every person is investing Rs. 2,00,000/- and claiming deduction of Rs. 1,50,000/-under section 80C and Rs. 50,000/- under section 80CCD (1B) towards NPS deduction.
Existing structure of Income Tax Slabs
Gross Total Income (Rs.)
|
Deduction
|
Taxable Income
|
Rate of Tax
|
Suppose Taxable Income
|
Calculation
|
Tax Payable
(excl cess)
|
up to 450000
|
200000
|
upto 250000
|
0
|
0
|
-
|
0
|
450001-700000
|
200000
|
250001-500000
|
5%
|
500000
|
0-250000- NIL , left 500000*5%
|
12500
|
700001-1200000
|
200000
|
500001-1000000
|
20%
|
1000000
|
12500 as above+500000*20%
|
112500
|
1200001 - and above
|
200000
|
above 1000000
|
30%
|
1100000
|
112500 as above+100000*30%
|
142500
|
From 1st April 2020, under the optional Tax Slabs regime, the revised slabs will be as under:
Income (Rs.)
|
Tax Rate
|
Suppose Taxable Income is
|
Tax Calculation
|
Tax Payable
|
Upto 250000
|
Nil
|
-
|
-
|
-
|
250001-500000
|
5%
|
Tax
rebate of up to Rs 12,500 if net taxable income does not cross Rs 5 lakh.
Thereby, making zero tax payable by an individual if his/her taxable income
does not exceed Rs 5 lakh.
|
||
500001-750000
|
10%
|
750000
|
250000*10%
|
25000
|
750001-1000000
|
15%
|
1000000
|
25000 as above+250000*15%
|
62500
|
1000001-1250000
|
20%
|
1250000
|
62500 as above+250000*20%
|
112500
|
1250001-1500000
|
25%
|
1500000
|
112500+250000*25%
|
162500
|
1500001- and above
|
30%
|
1600000
|
162500 as above+100000*30%
|
192500
|
But remember, once the option is exercised, you may not be eligible for claiming certain deductions.
Under this option/new slab structure; the total income of the Individual or HUF shall be computed -
without
any exemption or deduction under the provisions of
|
|
clause
(5)
|
Deduction
regarding travel concession or assistance (LTC)
|
clause
(13A)
|
special allowance to meet expenditure actually incurred on
payment of rent in respect of residential accommodation. (HRA)
|
clause
(14)
|
any such special allowance or benefit in the performance of
the duties of an office
|
other
than those as may be prescribed for this purpose
|
|
clause
(17)
|
daily allowance to members of Parliament etc.
|
clause
(32)
|
regarding minor child's income inclusion case
|
of
section 10
|
Income not included in total income.
|
OR
section 10AA
|
Special
provision in respect of newly established undertakings in free trade
zone, etc.
|
section
16
|
all
deductions from Salary income like entertainment allowance, professional tax, standard deduction of Rs. 50,000/-
|
clause
(b) of section 24 (in respect of the
property referred to in sub-section (2) of section 23)
|
deduction
for home loan
|
Where the property consists of a house or part of a house
which— (a) is in the occupation of the owner for the purposes of his own
residence; or, cannot actually be
occupied by the owner by reason of the fact that owing to his employment,
business or profession carried on at any other place, he has to reside at
that other place in a building not belonging to him,
|
|
clause
(iia) of sub-section (1) of section 32
|
Depreciation
on motor car regarding
|
section
32AD
|
Investment
in new plant or machinery in notified backward areas in certain States
|
section
33AB
|
Investment
in new plant or machinery in notified backward areas in certain States
|
section 33ABA
|
Site
Restoration Fund
|
sub-clause
(ii) or sub-clause (iia) or sub-clause (iii), of sub-section (1) or
sub-section (2AA), of section 35
|
Expenditure
on scientific research
|
section 35AD
|
Deduction
in respect of expenditure on specified business
|
section
35CCC
|
Rural
development allowance
|
clause
(iia) of section 57
|
any sum received by the assessee from his employees as
contributions to any provident fund or superannuation fund or any fund set up
under the provisions of the Employees' State Insurance Act, 1948 (34 of
1948), or any other fund for the welfare of such employees ; (Family Pension)
|
under
any of the provisions of Chapter VI-A
|
almost 75 deductions from section section 80A to section 80VV
(including section 80C, section 80TTA and section 80CCd(1B)
like, LIC, tuition fee, investment in ELSS, NPS, PPF, Medical Insurance, Education Loan, Donations etc.
|
other
than the provisions of sub-section (2) of section 80CCD
(can be claimed)
|
Deduction in respect of contribution to pension scheme of
Central Government. Where, in the case of an assessee,the Central Government or any other employer makes any
contribution to his account, the assessee
shall be allowed a deduction in the computation of his total income, of the
whole of the amount contributed by the Central Government or any other
employer as 75[does not exceed ten per cent of his salary in the previous
year].
|
or
section 80JJAA
(can be claimed)
|
Deduction in respect of employment of new employees.
|
Now, one must take care while opting for new slab option. The tax payable under old tax slabs, where deductions are allowable and under new tax slabs, where certain deductions are not allowed should be compared and analysed for tax saving purposes.
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