Another tax system is introduced in Union Budget 2020. There is a reduction in the income tax slabs and rejigging the income tax slabs to reduce the total tax payable by individuals. 70 tax exemptions will be expelled in the new tax regime introduced but the income between Rs 5 lakh to Rs 7.5 lakh will be taxed at the rate of 10% and the current rate was 20%, income between Rs 7.5 lakh to Rs 10 lakh will be taxed at the rate of 15% down from current 20%, and income between Rs 10 lakh to Rs 12.5 lakh will be taxed at the rate of 20% and the current rate was 30%.
Do I need to discontinue all the tax exemptions and deductions if I’ll go for the new tax regime?
According to the budget proposal, a taxpayer picking for the new tax system will have to swear off all the commonly available tax- reductions, for example, those available under sections 80C, 80D and so on except for section 80CCD (2), i.e., employer's contribution to NPS.
Would I be able to choose between the new and old tax regime every year?
Yes, you can pick between new and old tax regime in each and every financial year provided you do not have business income.
Are cess and surcharge still payable in the new tax system?
Yes, cess at the rate of 4%, and surcharge, according to your income level, is yet payable in the new tax regime.
Would I be able to still claim a tax rebate of Rs 12,500 under section 87A in the new tax regime?
Yes, according to budget proposals, a taxpayer can still claim a tax rebate of Rs 12,500 if his/her net taxable income doesn't exceed Rs 5 lakh in a financial year.
Do I have to file ITR if my annual income is below Rs.2.5 lakh?
You need not file an ITR if your annual income is below Rs.2.5 lakh but you should file a ‘Nil Return’ only for the record as there are many cases where you can deliver them as confirmation of your employment. For example, you can give your ITR while applying for a loan or visa.
Who can claim a rebate under Section 87A?
This can be claimed by any Indian resident who is having his total annual income under Rs.5 lakh. The maximum available rebate under 87A is Rs.12,500.
For domestic companies, the tax rates depend on the turnover of the respective companies:
Gross turnover can be a maximum of Rs.250 crore for the previous year
Gross turnover is more than Rs.250 for the previous year
An additional surcharge and cess are levied apart from the above mentioned tax slabs. The details of the surcharge and the cess that will be levied are given below:
- Cess: 4% of corporate tax
- Surcharge: If the taxable income is above Rs 1 crore but below Rs 10 crore, the surcharge that will be demanded is 7%. If the taxable income is above Rs.10 crore, the surcharge that will be demanded is 12%.
- Non-resident Indians: For non-resident Indians, regardless of their age, the exemption limit is up to Rs.2.5 lakh.
- If your net income is more than Rs.50 lakh but below Rs.1 crore, aside from a 4% cess, a 10% surcharge is also charged. If the net income is above Rs.1 crore, a 15% surcharge is charged.
- As compared to last year’s budget, the cess has increased from 3% to 4%.
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