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IT Slab FY 2020-21: Know the Difference According to Income

Suyash Agrawal Leave a comment

Currently introduced by FM Nirmala Sitharaman, Union Budget 2020-21 seems to be a set of challenging income tax provisions. There have been no provisions like the provisions of Union Budget 2020. In the said budget, FM has introduced the new tax slabs with reduced slab rate which taxpayers may adopt on a voluntary basis. This means taxpayers have a choice of selecting either of the two options (old or new slabs rate). It is witnessed that the new slabs are not much in favor of the employed individuals and adopting the new income tax slab 2020 might lead them to a huge tax outgo from their accounts.

Government Vision

According to CA Vinod Jain, the administration is now looking forward to having a simplified version of the tax rate structure and also the normal taxpayers who have no investments should get some incentives. Earlier when the corporate sector enjoyed a considerable benefit in tax rates there was an echo seeking incentives for the common taxpayers.

According to him, the new tax rates FY 2020 are not beneficial for the employed individuals who have their investments in the form of PF, insurance, home loans, etc. LTA, house rent, standard deduction, medical such as 80 C, investment of Rs 2 lakh, etc. are non-exempt as per the protocols of the new Union Budget.

Read Also: Current Income Tax Rates for FY 2019-20 (AY 2020-21)

Example: Here if a taxpayer is not having enough investments then it is beneficial for him to go with the new slab and later on if he invests in multiple instruments then he can switch back to the old tax slab.

As declared by Manish Khemka (chairman of Global Taxpayers Association and co-chairman of the PHD Chamber of Commerce and Industry-UP), the amendments in the tax slabs are actually a step towards the future direction. The government is aiming towards an entire simplified new GST system and so the complexities related to various concessions are over.

Next, there will be a system where the tax rates will be less and there will be more incentives on the investments. The step will allure the new professionals with high packages to invest. Such professionals are heavily taxed and therefore FM Nirmala Sitharaman has given them the relief in Budget 2020.

Drawbacks

Several employed individuals have already invested in LTA, PF, home loan, life insurance, etc. and every single year a considerable amount from their bank balance goes in such instruments. So clearly such salaried individuals will want to stick to the old tax slabs fy 2019-20 rather than shifting to the new slabs fy 2020-21.

As per Tax Expert Balwant Jain, many incentives in terms of tax payment have been abolished which makes it a less attractive choice of the taxpayers. According to him, a regular taxpayer will have to hire a tax expert to know the profit and loss arising after the deductions and exemptions as per the new policies.

Nobody is ever going to sacrifice the handsome amount earned under the exemption in the old system. There is no one who is not availing the benefits of exemptions under 80C. The old system had the standard deduction up to Rs. 50,000, LTA, interest on a home loan, Rs 50,000 on interest income to senior citizens, which no taxpayer would want to give up for the sake of adopting the new policies.

Below is the study revealing the advantages and disadvantages of both the system under different salaries:

Salary Rs. 10 Lakh Per Annum

Old Tax Slab FY 2019-20

If a professional with an annual package of Rs. 10 Lakhs has no investments, then such a person is compelled to pay the total tax of Rs. 1,12,500 as per the old slabs.

Deduction – From the above-mentioned amount Rs. 50,000 is reduced as the standard deduction, now he is obliged of paying Rs. 1.5 lakhs under 80C, 25,000 under mediclaim and 2 Lakh interest a year for a home loan. So clearly his payable tax is just Rs. 27,500.

New Tax Slabs for FY 2020-21

As per the new tax slab, the overall taxability of the person with an income of Rs. 10 Lakh per annum is Rs. 75,000. If an individual adopts the new tax slab then he/she is in a loss of Rs. 47,500 in a year.

Salary Rs. 12.5 Lakhs Per Annum

Old Tax Slab FY 2019-20

As per the old tax slab if the standard deduction is excluded (that means he/she has not done any investment) his total payable tax is Rs. 1,87,500. If the standard deduction is included then Rs. 50,000 is reduced from the tax-ability of the person. And if he has paid Rs. 1.5 lakh under 80C, Rs. 25,000 under Mediclaim and an interest of Rs. 2 lakh on a home loan in that year. Then his total taxability remains Rs. 77,500 only.

New Tax Slabs for FY 2020-21

As per the new tax slabs rate 2020, an individual with a gross income of Rs. 12.5 lakhs per year is liable to pay Rs. 1,25,000 as tax. So the individual adopting the new tax slab is clearly in the loss of Rs. 47,500.

Important: Section-Based Income Tax-Saving Tips For Salaried Person

Salary Rs. 15 Lakhs Per Annum

Old Tax Slab FY 2019-20

If a salaried individual with an annual income of Rs. 15 Lakhs is not having any investment and the standard deduction is also excluded then his/her total tax liability is Rs. 2,62,500. On the other hand if the standard deduction of Rs. 50,000 is excluded and if he has paid Rs. 1.5 lakh under 80C, Rs. 25,000 under Mediclaim and an interest of Rs. 2 lakh on a home loan in that year then his/her total tax liability falls down to be only Rs. 1,35,000.

New Tax Slabs for FY 2020-21

As per the new income tax slabs 2020, an individual with a gross income of Rs. 15 lakhs per year is liable to pay Rs. 1,87,500 as tax. So the individual adopting the new tax slab is clearly in the loss of Rs. 52,500.

Filing Tax Returns? Taxable Income To Be Higher Sans Rebate

Suyash Agrawal Leave a comment

A taxpayer is going to receive the advantage of the rebate if the taxable income calculated after the eligible tax exemptions and deductions results to be less than INR 5 Lakhs. Under the current provisions of the Income Tax Department, a taxpayer can enjoy a maximum rebate of INR 12,500 under section 87A of the Income Tax Act if he/she has a taxable income less than INR 5 Lakhs.

However, if the taxable income goes up by as low as INR 1, then you will be revoked from securing the rebate and will be obliged to pay the taxes according to the tax-slabs and provisions of the Income Tax Act Get to know complete guide of TDS provisions under income tax act 1961 at here. Also, we include several topics as TDS returns, TDS due dates, penalty & more. Read More .

The taxpayers having a taxable income of more than 5 Lakhs will be paying the taxes on an income more than the difference by which their income is going up by 5 Lakhs.

Let’s Take An Example to Understand This:

Suppose your taxable income calculated by your CA is INR 5,10,000. Then your tax liability arising will be:

IncomeTax Liability
Up to Rs 2.5 lakh0
Between Rs 2.5 lakh and Rs 5 lakh5% of Rs 2.5 lakh = Rs 12,500
Income above Rs 5 lakh (Rs 10,000)20% of Rs 10,000 = Rs 2000
Total tax liabilityRs 14,500
Final Tax liability with cess @ 4%Rs 15,080

From the above table, it is clear that if the taxable income of an individual is below INR 5 Lakh he/she will be getting a rebate of INR 12,500 but as soon as his income goes above INR 5 Lakhs then he will have to pay tax on the difference amount at the rate 20% along with the earlier rebated amount of INR 12,500.

The taxpayer is said to have paid higher, as he would have faced the tax on the difference amount of INR 10,000 at the rate of 20%, instead, he has to bear the burden of INR 15,080, inclusive of the rebate, which is even higher than the difference amount (15,080>10,000).

As a result of this, the taxpayer will be left with an income to spare of INR 4,94,920 (5,10,000 – 15,080) instead of the earlier amount he would have been getting after rebate, that is, INR 5,00,000.

Now, if the said person would have donated the excessive amount of INR 10,000 to an organization where he will get 100% deduction under Section 80G or any other section, this would have resulted in him having a more income in his hand.

A CA in a statement said that a person is likely to pay more tax if the income exceeds INR 5 Lakhs. That means the individual would be wound up paying a tax on a bigger amount then the difference amount. Moreover, the individual will not be getting the benefit of Marginal relief unlike that in the case when the income crosses INR 50 Lakh, INR 1 Crore, etc. depending on the cases.

In the case of Marginal Relief, an individual is relieved from the tax due to the crossing of a tax slab rateGet the details on income tax rates for FY 2019-20 (AY 2020-21). Various rates are provided such as Individual/HUF, Companies, Partnership Firms. Read More. The motive is to save an individual from paying the tax at the rate of the amount from which the income is exceeding.

What is the solution to this problem?

The best solution, in this case, is to avail the benefit of various deductions from the Income Tax Act, namely under 80C, 80D, etc. You just have to contact your CA who will inform you about these deductions in detail. You can also avail the deduction under 80G, by donating some amount, in case all the other deductions have already been used. But before donating you should check how much deductions will you be getting as there are different deduction rates for different organizations.

Gujarat HC Clears Consignments Without GST E-way Bills

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Gujarat High Court in its latest verdict commanded the GST department to release all the consignments that were seized for not carrying GST E-Way bill Get to know about GST E Way bill and its generating process through online and SMS in a simple manner. Also, we have attached original screenshots of official E way bill portal for better understanding. The act was merely the result of a wrong interpretation of section 130 of the GST Act.

The court was in the favor saying that to issue the notice of seizure under section 130 of the GST Act based on mere suspicion is not eligible for any action under section 130. The court said the same verdict for two such issues having a similar appeal.

The Issues Were: