The Union Budget for FY 2020-21 was presented by Finance Minister Nirmala Sitharaman on 01st February, 2020
Here we present you the Highlights of Union Budget 2020
* Proposed Direct Tax Reforms*
* New Simplified Personal Income Tax Regime for Individual Taxpayers
| Income Bracket | Tax Rate |
| 5L – 7.5L | 10% |
| 7.5L – 10L | 15% |
| 10L – 12.5L | 20% |
| 12.5L – 15L | 25% |
| Above 15L | 30% |
• Optional for tax payers
• Simplified income tax return
• Removal of 70 deductions
A person with Rs. 15 lakhs income will now pay Rs. 1.95 lakhs tax only from Rs. 2.73 lakhs
In new structure you cannot take benefit for the following items-
- Sec 80C – PF, ELSS
- Home Loan Interest
- NPS
- Standard Deduction
- HRA
- Medical Insurance
- LTA And many others! So choose wisely!
Income Tax Comparison to help decide between Old tax structure or New Tax Structure!!!!
| New Regime | |
| Gross Salary and Bonus (without deductions & exemptions) | 40,00,000 |
| Income tax payable | 9,25,000 |
| Education Cess @ 4% | 37,000 |
| Total | 9,62,000 |
| Per month deduction | 80,167 |
| Old Regime | |
| Gross Salary & Bonus | 40,00,000 |
| Less : Deduction | — |
| Education Allowance | 2,400 |
| Standard Deduction | 50,000 |
| House Rent Allowance | — |
| Home Loan Interest | 2,00,000 |
| 80C | 1,50,000 |
| Taxable Income (post deductions & exemptions) | 35,97,600 |
| Income tax payable | 8,91,780 |
| Education Cess @ 4% | 35,671 |
| Total | 9,27,451 |
| Per month deduction | 77,282 |
* Clarity for NRI confusion
->Number of days to qualify as NRI goes upto 240 from 183
->NRI global income to be taxed if the NRI does not pay tax in any country and is not a resident of any country (SeaFarers .. Ministry of finance should clarify for seafarers as they are not a resident of any country .. and 2 clauses now appear to contradict their residential status )
->For residents of UAE / any country where there is no tax need not worry as long as they have resident ship
* Employer’s contribution for provident fund, NPS and superannuation worth more than 7.5 lakh a year will be taxable
* The new income tax rules affects only those in a high salary bracket
The other major pointers of budget-
* Dividend Distribution Tax on companies removed and dividend to be taxed in the hands of the recipient. Redemption and Capital gains will not have TDS.
* 15% concessional rate of corporate tax extended to Power Sector
* Start ups provided with more income tax benefits
* Cooperative societies provided an option to be taxed at 22 % with no exemption
* Tax Audit threshold increased to 5 crores if less than 5 % turnover is in cash
* New Charitable Institution registration process to be completely electronic
* Faceless Appeals to be enabled in lines of faceless assessments
Vivaad se Vishvash (Simplification of Tax disputes)
• No Dispute but Trust Scheme
• Direct Tax Dispute Resolution
• Payment of all taxes will lead to waiver of penalty and interest
• Applicable for all pending appeals at all levels
PAN to be allotted instantly on basis on Aadhaar
*Our view *
-> For incomes up to 10-12 lakhs the new structure appears beneficial
-> For higher incomes with no home loan – new structure
-> If you have home loan interest 2 lakhs .. then it makes sense to stick to old structure
-> Once you choose the new structure then you cannot revert back to the old structure in the next few years
-> I think the new structure will become the norm going forward and it is being phased in at this point in time
-> One implication is that people will reduce investing in insurance policies only for the sake of saving tax
Overall the direction of the budget is towards simplification of direct taxation going forward…