The Finance Minister has made interesting changes for individual income taxpayers by offering a different tax slab for those who forego all exemptions and deductions.
At the same time, the old tax structure will remain intact. This means that individual taxpayers will have two tax structure – based on exemptions and deductions.
Frist is the old one where the individual can continue with deductions and exemptions.
For those who would like to avail the new structure that has a lower tax rate, but with multiple slabs should abandon all exemptions and deductions.
The new structure for those who doesn’t claim any deductions and exemptions is as follows.
| Personal Income tax slab for 2020-21 those who doesn’t claim any deductions and concessions | |
| Tax Slab | Tax Rate |
| Upto Rs 250000* | Nil |
| Rs 250000 to Rs 5 lakh | 5 % |
| Rs 500000 to Rs 7.5 lakh | 10 % |
| Rs 7.5 lakh to Rs 10 lakh | 15 % |
| Rs 10 lakh to Rs 12.5 lakh | 20% |
| Rs 12.5 lakh to Rs 15 lakh | 25% |
| Above Rs 15 lakh | 30 % |
| *Rebate of Rs 5 lakh is applicable | |
The Rs 5 lakh rebate can be enjoyed for all independent of the tax package he receives.
The existing tax structure as follows can be used by those who opts for concessions and deductions.
| Personal Income tax slab for 2020-21 for those who claim for exemptions and deductions | |
| Tax Slab | Tax Rate |
| UptoRs 250000* | Nil |
| Rs 250001 to Rs 5 lakh | 5 per cent |
| Rs 500001 to Rs 10 lakh | 20 per cent |
| Above Rs 10 lakh | 30 per cent |
| *Rebate of Rs 5 lakh is applicable | |
The budget 2020 retains the tax rates of PIT for those who avail the exemptions and deductions. There will be a Rs 5 lakh rebate.
For the super-rich, the surcharge will continue. Implication of this new tax structure is that there is Direct Tax Code recommendations are not implemented.
Difficulty of the new system
The new tax structure will be complex from the tax administration angle. Still, it may give more options to those who doesn’t use much deductions and concessions. Those who claim those have no option understandably, but to continue under the old scheme. Since majority of the salaried people avails exemptions, the new tax structure will not be attractive for them.
