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Budget Changes for FY 2020-21

Product Content Team
  • Updated

The Union Finance Minister has presented the budget for FY 2020-21. A new regime is introduced in the budget FY 2020-21. These changes will have an impact on the Income Tax calculations w.e.f April 2020.

Based on the new budget, taxpayers (employees) can now select between the old regime and the new regime to calculate Income Tax. The old regime has older tax rates and exemption components as in the previous financial year. The new regime will have lower tax rates and a few numbers of exemptions.

The tax slab rates as per the Old and New regimes are as follows: 

 

Income Tax Slabs Old Regime New Regime Surcharge Rate
₹0 - ₹2.5 lakh  Exempted Exempted 0
₹2.5 lakh - ₹5 lakh 5% 5% 0
₹5 lakh - ₹7.5 lakh 20% 10%  0
₹7.5 lakh - ₹10 lakh 20% 15% 0
₹10 lakh to ₹12.5 lakh 30% 20% 0
₹12.5 lakh - ₹15 lakh 30% 25% 0
₹15 lakh - ₹50 lakh 30% 30% 0
₹50 lakh - ₹1 crore 30% 30% 10
₹1 crore - ₹2 crore 30% 30% 15
₹2 crore - ₹5 crore 30% 30% 25
₹5 crores and Above 30% 30% 37
Scenario 1: Assume that the taxpayer has invested in 80C, and 80D and has HRA. Tax under both regimes will be calculated as follows:
 
Particulars Old Regime Calculation New Regime Calculation
Gross Income 850000 850000

Tax on Employment: Sec 16(iii)

 

 2400 0

Standard Deduction: Sec 16(ia)

 50000 0

House Rent Allowance: Section 10(13A)

 100000 0

Leave Travel Assistance: Sec. 10(5)

 60000 0

80C exemption

 150000 0

80D exemption

 25000 0

Taxable Income

 462600 850000

Calculated tax

 10630 52500

Rebate u/s 87A

 10630 0

Net tax + Cess

 0 54600
Scenario 2: Assume that the taxpayer has not done any investments. Tax under both regimes will be calculated as follows:
Particulars Old Regime Calculation New Regime Calculation
Gross Income 850000 850000
Tax on Employment: Sec 16(iii) 2400 0
Standard Deduction: Sec 16(ia) 50000 0
Taxable Income 797600 850000
Calculated tax 59520 52500
Rebate u/s 87A 0 0
Net tax + Cess 61901 54600
 

Additional Changes in Budget FY 2020-21:

Others Changes introduced in Budget 2020-2021:

  1. Section 80EEA extended: Loan date is extended from 31st March 2020 to 31st March 2021. An individual can claim additional interest of Rs.1.5 Lac (over and above the existing Rs. 2 Lac), if the individual has taken a loan between 1st April 2019 and 31st March 2021.
  2. If the Employer’s contribution towards PF, NPS, or any recognized superannuation exceeds INR 7,50,000 per annum, the excess amount would be treated as perquisite and will become taxable.

To know more, click here to find a copy of the finance bill.

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❓FAQs :

  • To read more about Budget changes for FY 2023-24, click here.
  • To read more about Budget changes for FY 2020-21, click here.

▶Video :

  • To watch a video on Budget changes for FY 2023-24, click here.
  • To watch a video on Budget changes for FY 2020-21, click here.

📃Documentation :

  • To learn more about the Tax Slabs of budget changes, click here. 
  • To learn more about the recent Budget changes for FY 2023-24, click here.

📢Product Update- To read about the product update, click here.

 

 

 

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