Budget 2020 has introduced a new income tax system for individual taxpayers. However, for the option of such discounted duty, the taxpayer will be required to deduct certain specific deductions.
These include a standard rebate of Rs 50,000, a rebate of Rs 1.50 lakh under Section 80C and interest on the self-occupied property of Rs 2 lakh, a deduction taken by most taxpayers. As a result, exempt tariffs may not always be beneficial. Based on the table of examples below, it is clearly proven that the maximum benefit under the new tax rate (if no investment is made) is Rs 75,000 in terms of tax savings.
As a result, in contrast to corporate tax rebate rates which reduce tax rates at income levels, there is a limited application of discount tax rates and individuals in lower-income brackets will benefit. The highest personal tax rate, which is 42.7 per cent, will continue to be a major challenge ** No tax up to Rs.500,000 taxable income as rebate under tax section 87A * Exceptive income slabs for persons aged 60 years and above (senior citizens) and residents of 60 years of age or older (very senior citizens) at any time of the previous year have the same amount.
A. The effectiveness of the new government is as follows: Reduced tax rates and reduced loyalty: The new the government provides for a discounted rate compared to the existing or old system of governance. Further, the required documentation is less and tax filing is easier as most of the discounts and rebates are not available. Investors may not choose to lock-in funds on fixed instruments for a set period of time: all taxpayers will be considered equivalent under the new government and there will be no criteria for availing tax exemptions.
This can be helpful for those types of taxpayers who cannot subscribe to a certain amount of investment, as most investments have a lock-in period, before which it cannot be withdrawn. They can make open-end mutual investments.
Funds/materials/deposits, which gives them a good income as well as the flexibility to withdraw. For example, certain eligible instruments have longer lock-in periods such as five-year lock-in period for fixed deposits at banks and post offices,
Equity-Linked Savings Scheme (ELSS) for three years
National Savings Certificate for five years (NSC) etc.
Increased liquidity in the hands of the taxpayer: The reduced tax rate will provide more disposable income to the taxpayer, who cannot invest in certain instruments due to certain financial or other personal reasons.
Flexibility to adapt the investment choice: Existing taxes provide relief to the taxpayer, but he invests in certain materials and methods as per the rules of law. This limits the investment choices for the taxpayer as he only has to invest in certain instruments. The new arrangement, however, gives taxpayers flexibility to customize their investment preferences. The provisions of the new government are Non-availability of fixed discount: The new tax system does not allow the taxpayer to avail the benefit of a fixed discount. The descriptive list is as follows:
(A) The sections described in section 10 are as follows:
(i) Section (5) –
(ii) section (13a) –
house rent allowance;
(iii) Section (14) –
Special Allowance in Rule 2 BB (e.g. Children’s Education Allowance, Hostel Allowance, Transport Allowance, Daily Allowance, Uniform Allowance etc.);
(iv) Section (1) –
Allowances for Members of Parliament / MLAs; (v)
section (32) – allowance for clubbing the income of a minor;
(B) exemption of SEZ unit under section 10AA;
(C) Standard discount, entertainment allowance discount
D) interest under section 24 in respect of the self-occupied or vacant property (for a rented house the loss under IFHP head shall not be waived under any other head and shall be sanctioned as C / f under the prevailing law);
(E) additional depreciation under 32 (1) (II);
(F) Exemption under sections 32AD, 33AB and 33ABA
(G) various exemptions for grants or expenditures in scientific research included in sub-section (ii) of sub-section (ii) or sub-section (iii), subsection (1) or sub-section (2AA); (H) exemptions under section 35AD or 35cc;
(i) exemption from family pension under section (iia) of section 57;
(H) Any exemption under section VI-A (e.g. Section 80C, 80cc 80, 80cc, 80D, 80DD, 80DDB, 80E, 80EE, 80EEA, 80EB, 80G) , 80 GG, 80 GG, 80 GGC, 80 AI, 80-IAB, 80-IAC, 80-IB, 80-IBA, etc.).
However, exemptions (contribution of employers to the employee’s account in the notified pension scheme) and section 80 JJAA (for new employment) may be claimed under sub-section (2) of section 80 CCD.
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