Budget 2020 gives option of lower income tax rates, new tax slabs without earlier exemptions - deductions – Check list

The Finance Minister in her Budget 2020 speech has come out with an option for the taxpayers to reduce their income tax liability. As a taxpayer one may continue with the existing tax regime or choose the new tax regime to pay lower tax rates. However, the new tax regime comes with a reduced number of tax exemptions and concessions.
The new tax-paying option has been introduced under section 115BAC in the Act.
On satisfaction of certain conditions, an individual or HUF shall, from the assessment year 2021-22 onwards, have the option to pay tax in respect of the total income at the following rates:

Total Income (Rs)
  • Up to 2,50,000 - Nil
  • From 2,50,001 to 5,00,000 - 5 per cent.
  • From 5,00,001 to 7,50,000 - 10 per cent.
  • From 7,50,001 to 10,00,000 - 15 per cent.
  • From 10,00,001 to 12,50,000 - 20 per cent.
  • From 12,50,001 to 15,00,000 - 25 per cent.
  • Above 15,00,000 - 30 per cent.
There are several deductions, exemptions and concessions that the taxpayer has to forgo which is currently available under Chapter VI-A other than the provisions of sub-section (2) of section 80CCD.
This means the taxpayer may not choose to avail tax benefit under section 80C, section 80D etc. Under section 80CCD (2), salaried employees get the tax benefit on employer contribution to his or her NPS account. The contribution made by the employer up to 10 per cent of salary (Basic plus Dearness Allowance) can be claimed as a deduction from the taxable income under Section 80CCD(2) of the Income Tax Act,1961. There is no upper cap in terms of the amount on this tax deduction. This deduction is over and above the ceiling limit of Rs 1.5 lakh provided under Section 80C and limit of Rs 50,000 under Section 80CCD(1B).
Some important exemptions/ deductions not available under new regime: ( section 115BAC )
(i) Leave travel concession as contained in clause (5) of section 10;
(ii) House rent allowance as contained in clause (13A) of section 10;
(iii) Some of the allowance as contained in clause (14) of section 10;
(v) Allowance for income of minor as contained in clause (32) of section 10;
(vii) Standard deduction, deduction for entertainment allowance and employment/professional tax as contained in
section 16;
(viii) Interest under section 24 in respect of self-occupied or vacant property referred to in sub-section (2) of section 23.
(Loss under the head income from house property for rented house shall not be allowed to be set off under any
other head and would be allowed to be carried forward as per extant law);
(ix) Additional deprecation under clause (iia) of sub-section (1) of section 32;
(x) Deductions under section 32AD, 33AB, 33ABA;
(xiii) Deduction from family pension under clause (iia) of section 57;
(xiv) Any deduction under chapter VIA (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, etc). However, deduction under
sub-section (2) of section 80CCD (employer contribution on account of the employee in notified pension scheme) and
section 80JJAA (for new employment) can be claimed.
Also, the lower tax rate will be allowed without set off of any loss,-
(i) carried forward or depreciation from any earlier assessment year, if such loss or depreciation is attributable to any of the deductions referred to in (a) above; or
(ii) under the head house property with any other head of income
Even in the new tax regime, the following allowances will be allowed:
(a) Transport Allowance granted to a divyang employee to meet the expenditure for the purpose of commuting between place of residence and place of duty
(b) Conveyance Allowance granted to meet the expenditure on conveyance in performance of duties of an office;
(c) Any Allowance granted to meet the cost of travel on tour or on transfer;
(d) Daily Allowance to meet the ordinary daily charges incurred by an employee on account of absence from his normal place of duty.
This amendment will take effect from 1st April, 2021 and will, accordingly, apply in relation to the assessment year 2021-22 and subsequent assessment years.

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