Income Tax Slab FY 2020-21 – Budget 2020-21 Review

Union Budget 2020-21 is released by Finance Minister Nirmala Sitharaman. Income Tax Slab for FY 2020-21 is revised in new budget. Now you need not to pay tax for income up to 5 Lakh. Additionally tax percentage is also changed. At first instance it seems to be very good budget for middle class. But, it’s not. It is give and take budget. Where two parallel tax structure is proposed.

• Continue old Income Tax Slab for FY 2020-21 – No tax slab change & No change in exemption. You can enjoy tax saving by investing in various tax saving instruments.
• Adopt new income tax slab where income tax rate is lower & flat. In this case, you cannot claim any tax exemption such as 80C,80D etc.

A choice of selecting new or old tax regime is given to tax payer. Keeping Tax Payer in Confusion State L

Apart from Income Tax Slab few more changes are proposed in the union budget of fiscal year 2020-21. I have tried to review budget 2020-21. Here is a detail of Key Income Tax Benefits and changes announced in budget 2020-21 along with review.

Budget 2020-21 – Income Tax Slabs

# New Income Tax Slab FY 2020-21 – Key Announcements

• Introduction of new simplified personal tax regime.
• No income tax for income up to Rs 5 lakh
• 10% income tax for earning between Rs 5 lakh to Rs 7.5 lakh against 20% earlier
• 15% income tax for earning between Rs 7.5-10 lakh against 20% earlier
• 20% income tax for earning between Rs 10-12.5 lakh against 30% earlier
• 25% income tax for earning between Rs 12.5-15 lakh against 30% earlier
• Income above Rs 15 lakh to continue to pay tax at 30%
• New income tax scheme is optional, without exemptions
• Dividend Distribution Tax (DDT) abolished, shifted to individuals instead of companies
• IT Act will be amended to allow faceless appeals.
• 5 Lakh benefit on interest paid on affordable housing to be continued up to March 2021
• To launch new direct tax dispute settlement scheme; interest, penalty waived till March 31, 2020

Income Tax Slab Rate for FY 2020-21

As per above announcement New Income Tax Slab for FY 2020-21 is given below.

The new income tax regime is optional and taxpayer can either continue old exemption and deduction or opt for new reduce tax rate. In new tax regime total seven different tax slabs are defined.

As per new proposal people with income between 5 lakh to 7.5 lakh need to pay tax with rate of 10%; between 7.5 lakh to 10 lakh 15% tax rate is applicable; between 10 lakh to 12.5 lakh 20%; between 12.5 to 15 lakh 25% and above 15 lakh 30% tax rate is applicable.