Finance Minister Nirmala Sitharaman made a new proposal in her budget speech on income tax slab and tax rate. Apart from this, we will give you information about the proposed Income Tax Slab, but first of all know that to avail the new tax slab, you will have to deal with 70 kinds of rebates and deductions in income tax. Sections 80C, 80D, 80TTA, 80TTB etc. are present in them. At the moment, there are also some exemptions which have not been changed and can be availed by this. So, before calculating your income tax, keep these in mind and assess whether you are going to benefit more in the earlier tax slab or in the new tax slab. For the present, the proposed new tax slab will come into force from the next financial year.
Proposed new tax slab (2020-21)
According to the proposed new tax slab, income up to Rs 2.5 lakh will remain tax free as before and taxpayers with income between Rs 2.5 to 5 lakh will have to pay 5 per cent tax. 5 percent tax will have to be paid on annual income of Rs 5 to 7.5 lakh. Income of Rs 7.5 lakh to Rs 10 lakh will require 15% tax. Under the new tax regime, 20 percent tax will have to be paid on annual income ranging from Rs 10 lakh to Rs 12.5 lakh. On annual income of Rs 12.5 to 15 lakhs, now 25 percent tax may have to be paid. You will have to pay 30 percent tax on income above Rs 15 lakh. According to Tax and Investment Expert Balwant Jain, in the proposed new tax slab you can get the benefit of rebate on the following income.
Gratuity from the employer: If you get the amount of gratuity from the employer then it can also come under exemption under new tax slab or new tax structure. An employee is eligible to receive gratuity after working for 5 consecutive years in an institution.
Money received on maturity of life insurance: Life insurance premium which comes under section 80C is not exempt under the new tax regime. However, tax will be exempt under Section 10 (10D) on money received on maturity of life insurance.
Employer's contribution to EPF or NPS: If your employer deposits money in your Employees Provident Fund (EPF) or National Pension System (NPS) account, then you will get the benefit of exemption. However, according to Jain, the amount to be deposited in a financial year in EPF, NPS and superannuation account is up to Rs 7.5 lakh. If this amount is more than 7.50 lakhs, then the discount will only be up to 7.50 lakhs. A lump sum amount ie 60% of the amount received on the maturity of the NPS account can also be exempt from the new tax regime.
Exemption on PPF Interest and Maturity Amount: The interest on PPF under the new tax regime and the amount received on maturity will also be exempt under the new tax regime.
Interest on Sukanya Samriddhi Yojana and money received on maturity: According to Jain, the interest on Sukanya Samriddhi Yojana and the amount on its maturity will continue to be exempt under the new tax regime. However, exemption under Section 80C on the amount to be invested in it will not be available under the new tax regime.
Gift from the employer: If you get a gift of up to Rs 5,000 from the employer, then it will not be taxable.
Interest on EPF : The rebate will also continue in the new tax slab on the interest received on EPF. Jain says that tax rebate on EPF rate up to 9.5% will continue.
Interest to Senior Citizens: According to the new tax regime, senior citizens will get tax exemption on interest earned on the savings account, posting deposit or fixed deposit of post office, bank or cooperative banks, says Jain.