Budget 2020 has given taxpayers the choice to settle between the present tax regime (which allows availing existing tax exemptions and deductions) and a replacement tax regime with lower tax rates and new tax slabs but no tax exemptions and deductions. The new tax system offers new tax slabs with lower tax rates and simultaneously removes tax exemptions/deductions which can lead to lower tax outgo for taxpayers.
The Income-tax rates applicable during the Financial year 2020-2021 would be:
S.No |
Slab Rate |
Tax Rate |
| 1 | Up to INR 2,50,000 | Nil |
| 2 | INR 2,50,001 to INR 5,00,000 | 5% |
| 3 | INR 5,00,001 to INR 7,50,000 | 10% |
| 4 | INR 7,50,001 to INR 10,00,000 | 15% |
| 5 | INR 10,00,001 to INR 12,50,000 | 20% |
| 6 | INR 12,50,001 to INR 15,00,000 | 25% |
| 7 | Above 15,00,000 | 30% |
According to the income tax rates for the FY (2020- 2021) people earning salaries up to Rs. 5,00,000 don’t have to pay any tax. If a person’s taxable income is Rs. 5,00,000 they will be able to avail tax rebate of Rs. 12,500 under section 87A. The tax rebate is allowed for both the FY (2019 – 2020) & (2020 – 2021). And the tax rate has not changed for the people earning salaries above Rs. 15,00,000
List of exemptions and deductions that a taxpayer will have to give up while choosing the income tax slabs for the FY(2020-2021)
- Leave Travel Allowance as per clause (5) of section 10
- House Rent Allowance as per clause (13A) of section 10
- Relocation Allowance
- Helper Allowance
- Children Education allowance
- Standard deduction of Rs. 50,000 under section 16
- Employment/Professional Tax deduction as per section 16
- Interest on Housing loan(section 24)
- Daily expenses in the course of employment
- Other special allowances [section10(14)]
People opting the tax rate for the FY (2020 2021) can’t claim for deductions under many sections such as 80C ( for a maximum of Rs 1.5 lakh by investing in specified instruments), 80D (for medical insurance paid, house rent allowance, leave travel allowance, etc.), 80CCD, 80CCC, 80DDB, 80E, 80EEA, 80EE, 80G, 80GGA, 80GG, 80GGC, 80IA, 80-IAC, 80-IAB, 80-IBA, 80-IB, etc
Income Tax slabs for FY (2019 – 2020) & FY (2020 – 2021)
A salaried individual has the option to choose between the income tax slab rate for FY (2019- 2020) & FY (2020- 2021) based on the benefits in terms of tax savings
Option 1 |
Option 2 |
||
FY(2019 – 2020) |
FY(2020-2021) |
||
| Up to Rs. 2,50,000 | Nil | Up to Rs. 2,50,000 | Nil |
| Rs 2,50,001 to Rs 5,00,000 | 5% | Rs 2,50,001 to Rs 5,00,000 | 5% |
| Rs 5,00,001 to Rs 10,00,000 | 20% | Rs 5,00,001 to Rs 7,50,000 | 10% |
| Rs 7,50,001 to Rs 10,00,000 | 15% | ||
| Above Rs. 10,00,000 | 30% | Rs 10,00,001 to Rs 12,50,000 | 20% |
| Rs 12,50,001 to Rs 15,00,000 | 25% | ||
| Above 15,00,000 | 30% | ||
Income tax slabs and rates for citizens between 60-80 years
Option 1 |
Option 2 |
||
FY(2019 – 2020) |
FY(2020 – 2021) |
||
| Upto Rs. 3,00,000 | Nil | Upto Rs. 2,50,000 | Nil |
| Rs. 3,00,001 to Rs. 5,00,000 | 5% | Rs. 2,50,001 to Rs. 5,00,000 | 5% |
| Rs. 5,00,001 to Rs. 10,00,000 | 20% | Rs. 5,00,001 to Rs. 7,50,000 | 10% |
| Rs. 7,50,001 to Rs. 10,00,000 | 15% | ||
| Above 10,00,001 | 30% | Rs. 10,0001 to Rs. 12,50,000 | 20% |
| Rs. 12,50,001 to Rs. 15,00,000 | 25% | ||
| Above 15,00,000 | 30% | ||
Option 1 |
Option 2 |
||
FY(2019 – 2020) |
FY(2020 – 2021) |
||
| Up to Rs 5,00,000 | Nil | Up to Rs 2,50,000 | Nil |
| Rs 2,50,001 to Rs 5,00,000 | 5% | ||
| Rs 5,00,001 to Rs 10,00,000 | 20% | Rs 5,00,001 to Rs 7,50,000 | 10% |
| Rs 7,50,001 to Rs 10,00,000 | 15% | ||
| Above Rs 10,00,001 | 30% | Rs 10,00,001 to Rs 12,50,000 | 20% |
| Rs 12,50,001 to Rs 15,00,000 | 25% | ||
| Above Rs 15,00,000 | 30% | ||
Note: An additional 4% Health & education cess and surcharge rates remain the same
Both tax rates exist. An individual should be aware of exemptions & deductions and evaluate which tax rate is better for them. If individuals don’t have many exemptions then opt for the new FY (2020- 2021) tax rate which is more beneficial in terms of tax saving
Income Tax Slabs to calculate tax by using the income tax slab for the FY (2019 -2020) OR FY (2020 – 2021)
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