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Budget 2020 Income Tax Slabs and Rates HIGHLIGHTS: Big relief for middle class tax payers, but if they forgo exemptions

Budget 2020 Income Tax Slabs and Rates for FY 2020-21 HIGHLIGHTS: No tax upto Rs 5 lakh, 10% tax for income between Rs 5 lakh to Rs 7.5 lakh, 15% tax for income between 7.5 lakh to 10 lakh, 20% tax for income between 10 lakh to 12.5 lakh, 25% tax for income between 12.5 lakh to 15 lakh and 30% tax for income above 15 lakh

By: Express Web Desk
New Delhi | Updated: February 2, 2020 4:40:49 pm
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Budget 2020 Income Tax Slab Rates Changes Expectations: Presenting her second Union Budget in Parliament Saturday, Finance Minister Nirmala Sitharaman cut tax rates significantly for the salaried class, giving them relief, but provided they forgo exemptions. For financial year 2020-21, people earning up to Rs 5 lakh will not have to pay any income tax while those with income between Rs 5 lakh to Rs 7.5 lakh will have to pay 10 per cent of income tax, this is half of what they are paying now. Also, there will be 15% tax for income between 7.5 lakh to 10 lakh and 20 per cent tax for income between 10 lakh to 12.5 lakh. The Finance Minister also said people earning between Rs 12.5 lakh to Rs 15 lakh will have to pay 25 per cent of tax while those with income above Rs 15 lakh will pay 30 per cent tax.

READ | Govt invokes clause in FRBM Act to raise fiscal deficit target to 3.8% from 3.3%

So, as per the new announcements, a person earning Rs 15 lakh per anum and not availing any deductions will pay Rs 1.95 lakh tax in place of Rs 2.73 lakh now. Sitharaman also said Rs 40,000 crore per annum will be revenue foregone from new income tax rates for individuals and that the government has removed 70 exemptions, deductions with a view to further simplify tax regime.

READ | Budget 2020 new income tax regime will take away these exemptions; Full list

Nirmala Sitharaman, however, said the government expected tax buoyancy will take time and the recent cut in corporate tax will cause loss of substantial revenue in short-run and that economy will reap huge returns in due course.

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Finance Minister Nirmala Sitharaman presented the Union Budget 2020. Income Tax Slabs and Rates were announced, giving relief to middle-class taxpayers, but if they forgo exemptions. Follow this space for HIGHLIGHTS. Read our other Live blogs on Budget 2020, Markets

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New income tax slabs, lower rates if exemptions foregone

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Conditions when most key exemptions become invalid

Budget 2020 announcement for the salaried class proposes a new tax regime slashing income tax rates and rejigging income tax slabs to slash total tax payable by individuals. But the rider: most key exemptions are gone if one were to go for this option: home loan interest, HRA, LTA, health insurance, along with the standard deduction.  Here is a detailed list

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New benefits for only those who don’t claim deductions: CEO CEO Adhil Shetty said, "To maximise their benefits from the new tax regime, taxpayers must understand what it means to claim or not claim deductions, since the new benefits are available only to those who don’t claim deductions. Under the new regime, the 30% slab, which was stuck for nearly a decade at Rs. 10 lakh, has finally moved to Rs. 15 lakh – an increase of a whopping 50%. Also, income up to Rs. 5 lakh is now exempted from tax, and lower tax rates apply on income between Rs. 5 lakh and 15 lakh if you don’t claim deductions. The move to increase tax-exempted income through the introduction of new tax slabs, as well as through the reported rationalization of deductions and exemptions, may be welcomed by taxpayers seeking simplicity in taxation. However, tax-payers own and want to continue with their tax-saving investments. Therefore, they must calculate whether they benefit by moving to the new regime without deductions or remaining in the old regime to continue claiming deductions."

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Govt removes incentives to 'save' nation with no social security: TMC on Budget

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Here are the new income tax rates

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What are the new Income tax rates?

#No tax upto Rs 5 lakh
# 10% tax for income between Rs 5 lakh to Rs 7.5 lak
# 15% tax for income between 7.5 lakh to 10 lak
# 20% tax for income between 10 lakh to 12.5 lak
# 25% tax for income between 12.5 lakh to 15 lak
# 30% tax for income above 15 lakh

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Income tax, Union Budget 2020, Income tax news, Income tax rebate in Budget 2020, Finance Minister Nirmala Sitharaman, economic survey, Indian express Budget 2020 Income Tax Slabs, Rates for FY, AY 2020-21 Expectation: Will there be income tax reliefs for you in this Budget?

Budget 2020 Income Tax Slab Rates Changes Expectations:

On the direct tax front, the government has already announced a sharp cut in corporate tax rate from 30 per cent to 22 per cent (excluding cess and surcharge) in September 2019 to promote investment activity in the economy. Even on the indirect taxes front, the GST rates have been reduced on the multiple occasions.

When the government had announced cut in corporate tax rate last year, many argued for a cut in income tax rate for individuals in a bid to leave more at the hands of consumers at a time when the consumption in the economy has been slowing down.

The CEO of a brokerage firm said that that a cut in corporate tax rate would not help push investments at a time when the capacity utilisations remain low. “Only when the consumption in the economy rises and capacity utilisations grow, will companies be willing to go for expansion and fresh investments. And in a bid to push consumption, some relief should be provided to individual tax payers in the forthcoming Budget,” he said.

The government has pegged its tax collections to drop by Rs 1.45 lakh crore annually as a result of cut in corporate tax rates in the short term. Over a period, rising economic growth through higher investment activity is expected to compensate for the tax shortfall.

Last year, the gratuity limit was raised from Rs 10 lakh to Rs 30 lakh. The creation of a new pension scheme for employees in the unorganised sector was announced. A full tax-rebate to all those earning less than Rs 5 lakh was also announced. There was a reduction in standard deduction and there were tax benefits granted for interest earned on bank deposits and tax benefits for home sales.

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First published on: 01-02-2020 at 07:06:10 am
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