Introduction-
So here comes my blog to explain Income Tax Slabs under Budget 2020 for the assessment year 2021-22.
In budget 2020 the finance minister has introduced new tax regime with an option for the taxpayers whether to opt new or old tax regime. An individual who is currently availing more deductions & exemption under the Income Tax Act may choose to avail and continue to pay tax in the old regime.
All Deductions under Section 80C to 80E (like section 80C, 80CCC, 80CCD, 80D, 80DD, 80DDB, 80E, 80EE, 80EEA, 80EEB, 80G, 80GG, 80GGA, 80GGC, 80IA, 80-IAB, 80-IAC, 80-IB, 80-IBA, 80TTA/80TTB etc.) Standard deduction, House rent allowance, Interest paid on housing loan, Children education allowance, Leave Travel Allowance, Other special allowances etc. will not be claimable under new tax regime. Deduction under section 80JJAA (for new employment) can still be claimed.
However, the National Pension System (NPS) tax break under section 80CCD (2) will continue. Even if you switch to the new regime, the deduction can help you save significantly if your employer offers the option. Employer’s contribution of up to 10 % of salary (i.e. basic pay plus dearness allowance) is eligible for tax relief under section 80CCD (2) (for government employees this limit is 14%.)
Income Tax Slab rates are as under-
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Income Tax Slabs
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Existing Tax Rate
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New Tax Rate
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Health and Education Cess
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Income up to Rs 2,50,000
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No tax
|
No tax
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-
|
|
Income from Rs 2,50,000 – 5,00,000
|
5%
|
5%
|
4% of Income Tax
|
|
Income from Rs 5,00,000 – 7,50,000
|
20%
|
10%
|
4% of Income Tax
|
|
Income from Rs 7,50,000 – 10,00,000
|
20%
|
15%
|
4% of Income Tax
|
|
Income from Rs 10,00,000 – 12,50,000
|
30%
|
20%
|
4% of Income Tax
|
|
Income from Rs 12,50,000 – 15,00,000
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30%
|
25%
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4% of Income Tax
|
|
Income more than Rs 15,00,000
|
30%
|
30%
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4% of Income Tax
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Condition 1- If the taxpayers have availed deductions i.e. Standard deduction, Deduction under section 80C, 80D, Interest on housing loan etc.
Example 1-
If Mr. X has Gross Total Income of Rs. 20,00,000 for the financial year 2020-2021 and having some investments under income tax, how to calculate taxable income and tax amount under Old Tax Regime & New Tax Regime?
Solution-
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Particulars
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Under Old Tax Regime
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Under New Tax Regime
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|
|
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Calculation
|
|
Calculation
|
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Gross Total Income
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20,00,000
|
|
20,00,000
|
|
Less:- Deductions
|
|
|
|
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Standard Deduction
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50,000
|
4,25,000
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0
|
0
|
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Under Section 80C
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1,50,000
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0
|
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Under Section 80D
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25,000
|
0
|
|
Interest on Housing Loan 24(B)
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2,00,000
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0
|
|
Taxable Income
|
|
15,75,000
|
|
20,00,000
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Based on above figure as example 1, calculation of tax amount under Old Tax Regime & New Tax Regime are as under-
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Particulars
|
Under Old Tax Regime
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|
Under New Tax Regime
|
|
|
|
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Calculation
|
|
|
Calculation
|
|
Taxable Income
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15,75,000,
|
Taxable Income
|
20,00,000
|
|
Tax Slabs
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Tax Rate
|
Tax Amount
|
Total Tax Liability
|
Tax Rate
|
Tax Amount
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Total Tax Liability
|
|
up to Rs 2,50,000
|
0
|
0
|
2,85,000
|
0
|
0
|
3,37,500
|
|
Rs 2,50,000 – Rs 5,00,000
|
5%
|
12,500
|
5%
|
12,500
|
|
Rs 5,00,000 – Rs 7,50,000
|
20%
|
50,000
|
10%
|
25,000
|
|
Rs 7,50,000 – Rs 10,00,000
|
20%
|
50,000
|
15%
|
37,500
|
|
Rs 10,00,000 – Rs 12,50,000
|
30%
|
75,000
|
20%
|
50,000
|
|
Rs 12,50,000 – Rs 15,00,000
|
30%
|
75,000
|
25%
|
62,500
|
|
Above Rs 15,00,000
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30%
|
22,500
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30%
|
1,50,000
|
|
Total Tax Liability (Ex. Cess)
|
|
|
Rs. 2,85,000
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Total Tax Liability (Ex. Cess)
|
|
Rs. 3,37,500
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Condition 2- If the taxpayers have availed deductions i.e. Standard deduction, Deduction under section 80C, 80D, etc.
Example 2-
If Mr. X has Gross Total Income of Rs. 10,00,000 for the financial year 2020-2021 and having some investments under income tax, how to calculate taxable income and tax amount under Old Tax Regime & New Tax Regime?
Solution-
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Particulars
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Under Old Tax Regime
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Under New Tax Regime
|
|
|
|
Calculation
|
|
Calculation
|
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Gross Total Income
|
10,00,000
|
|
10,00,000
|
|
Less:- Deductions
|
|
|
|
|
Standard Deduction
|
50,000
|
2,25,000
|
0
|
0
|
|
Under Section 80C
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1,50,000
|
0
|
|
Under Section 80D
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25,000
|
0
|
|
Taxable Income
|
|
7,75,000
|
|
10,00,000
|
Based on above figures as example 2, calculation of tax amount under Old Tax Regime & New Tax Regime are as under-
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Particulars
|
Under Old Tax Regime
|
|
Under New Tax Regime
|
|
|
|
|
Calculation
|
|
|
Calculation
|
|
Taxable Income
|
7,75,000,
|
Taxable Income
|
10,00,000
|
|
Tax Slabs
|
Tax Rate
|
Tax Amount
|
Total Tax Liability
|
Tax Rate
|
Tax Amount
|
Total Tax Liability
|
|
up to Rs 2,50,000
|
0
|
0
|
67,500
|
0
|
0
|
75,000
|
|
Rs 2,50,000 – Rs 5,00,000
|
5%
|
12,500
|
5%
|
12,500
|
|
Rs 5,00,000 – Rs 7,50,000
|
20%
|
50,000
|
10%
|
25,000
|
|
Rs 7,50,000 – Rs 10,00,000
|
20%
|
5,000
|
15%
|
37,500
|
|
Total Tax Liability (Excluding Cess)
|
|
|
Rs. 67,500
|
Total Tax Liability (Excluding Cess)
|
|
Rs. 75,000
|
Condition 3- If the taxpayers have not made any investment during the year-
Example 3-
If Mr. X has Gross Total Income of Rs. 8,00,000 for the financial year 2020-2021 and have not made any investments under income tax, how to calculate taxable income and tax amount under Old Tax Regime & New Tax Regime?
Solution-
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Particulars
|
Under Old Tax Regime
|
Under New Tax Regime
|
|
|
|
Calculation
|
|
Calculation
|
|
Gross Total Income
|
8,00,000
|
|
8,00,000
|
|
Less:- Standard Deduction
|
50,000
|
0
|
0
|
|
Taxable Income
|
|
7,50,000
|
|
8,00,000
|
Based on above figures as example 3, calculation of tax amount under Old Tax Regime & New Tax Regime are as under-
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Particulars
|
Under Old Tax Regime
|
|
Under New Tax Regime
|
|
|
|
|
Calculation
|
|
|
Calculation
|
|
Taxable Income
|
7,50,000,
|
Taxable Income
|
8,00,000
|
|
Tax Slabs
|
Tax Rate
|
Tax Amount
|
Total Tax Liability
|
Tax Rate
|
Tax Amount
|
Total Tax Liability
|
|
up to Rs 2,50,000
|
0
|
0
|
62,500
|
0
|
0
|
45,000
|
|
Rs 2,50,000 – Rs 5,00,000
|
5%
|
12,500
|
5%
|
12,500
|
|
Rs 5,00,000 – Rs 7,50,000
|
20%
|
50,000
|
10%
|
25,000
|
|
Rs 7,50,000 – Rs 10,00,000
|
|
|
15%
|
7,500
|
|
Total Tax Liability (Excluding Cess)
|
|
|
Rs. 62,500
|
Total Tax Liability (Excluding Cess)
|
|
Rs. 45,000
|