New Slab v/s old slab – Income Tax

So the Union Budget 2020 has led to so many expectations (positive ofcourse) for all the tax assessees in terms of one of the basic amendment- the main one for which we all were waiting for since everytime i guess…

Changes in Income Tax Slab rates

So here comes the New slab for Individuals * but with certain T&C (ofcourse)-

But before discussing the slab rates I think we all must know certain important points regarding the same.

a) This slab is for INDIVIDUAL only.

b) This slab is OPTIONAL.

c) The people opting this slab shall not be entitled to around 70 deductions and exemptions (BIG LOSS)

d) Option to be exercised on or before due date of ITR filing for AY 2021-22. (BE FAST IN CALCULATING)

e) Assessees having Business income shall have the option to withdraw from the new slab only for once. (PLEASE THINK BEFORE OPTING)

f) Only 2 deductions are allowed-
 Section 80CCD(2) [i.e., employer’s contribution on account of an employee in a notified pension scheme] and Section 80JJAA [i.e. for new employment] 

Now we shall discuss the rates offered by New Slab and compare the same with old rates-

Income slabs (Rs)Tax Rate(Old Regime)Tax Rate(New Regime – devoid of exemptions & deductions)
Up to 2.5 lakhNilNil
2.5-5 lakh5%5%
5-7.5 lakh20%10%
7.5-10 lakh20%15%
10-12.5 lakh30%20%
12.5-15 lakh30%25%
Above 15 lakh30%30%


Now the most important question arises- Which one to choose??

Lets take an example for better understanding-

Example No.1-

ParticularsOld Tax Regime (Rs)New Tax Regime (Rs)
Gross Income1,200,0001,200,000
Deductions:
U/Sec: 80C150,000
U/Sec: 80D25,000
U/Sec: 24(b)75,000
Taxable Income950,0001,200,000
Tax Slab (OLD)
0 to 2.5 Lakh
2.5 to 5 Lakh @ 5%12,500
5 Lakh to 10 Lakh @ 20%90,000
> 10 Lakh @ 30%
Tax Slab (NEW)
0 to 5 Lakh
2.5 to 5 Lakh @ 5%12,500
5 to 7.5 Lakh @ 10%25,000
7.5 Lakh to 10 Lakh @ 15%37,500
10 Lakh to 12.5 Lakh @ 20%40,000
12.5 Lakh to 15 Lakh @ 25%
> 15 Lakh @ 30%
Income Tax102,500115,000
Cess @ 4%4,1004,600
Total Tax payable106,600119,600

Example No.2-

ParticularsOld Tax Regime (Rs)New Tax Regime (Rs)
Gross Income700000700000
Deductions:
U/Sec: 80C150,000
U/Sec: 80D25,000
U/Sec: 24(b)75,000
Taxable Income450000700000
Tax Slab (OLD)
0 to 2.5 Lakh
2.5 to 5 Lakh @ 5%10000
5 Lakh to 10 Lakh @ 20%
> 10 Lakh @ 30%
Tax Slab (NEW)
0 to 5 Lakh
2.5 to 5 Lakh @ 5%12,500
5 to 7.5 Lakh @ 10%20000
7.5 Lakh to 10 Lakh @ 15%
10 Lakh to 12.5 Lakh @ 20%
12.5 Lakh to 15 Lakh @ 25%
> 15 Lakh @ 30%
Income Tax1000032500
Cess @ 4%4001300
Total Tax Outgo1040033800

Example No.3-

ParticularsOld Tax Regime (Rs)New Tax Regime (Rs)
Gross Income500000500000
Deductions:
U/Sec: 80C
U/Sec: 80D
U/Sec: 24(b)
Taxable Income500000500000
Tax Slab (OLD)
0 to 2.5 Lakh
2.5 to 5 Lakh @ 5%12,500
5 Lakh to 10 Lakh @ 20%
> 10 Lakh @ 30%
Tax Slab (NEW)
0 to 5 Lakh
2.5 to 5 Lakh @ 5%12,500
5 to 7.5 Lakh @ 10%
7.5 Lakh to 10 Lakh @ 15%
10 Lakh to 12.5 Lakh @ 20%
12.5 Lakh to 15 Lakh @ 25%
> 15 Lakh @ 30%
Income Tax12,50012,500
Cess @ 4%5,005,00
Total Tax Outgo13,00013,000

So basically it seems that if we are falling in high income group and have invested in Tax saving schemes then we should clearly go for Old slab.

While for individuals in the middle-income group, earning a gross income of say Rs 4-5 lakh; the new regime may prove advantageous. (with no deductions and tax savings available)

If you are looking to fulfil your financial obligations, namely – wealth creation through investments in tax-saving instruments; paying premiums to address insurance needs (life and health); paying children’s tuition fees; paying Equated Monthly Instalments (EMIs) of an education loan; buying a house with a home loan; and so on, the older regime still works in the interest of your financial wellbeing.

I hope this reading will be useful for you.

Thanks

CA Tanvi Gupta
ACA , DISA, Bcom

Changes in ITR 1 for FY 18-19

As we have entered into the New financial year i.e. 2019-20, the Govt. has released new ITR Forms for return filing for FY 2018-19.

Till date, Income tax department has released ITR 1 and ITR 4 forms (available on Income tax portal for filing).

Here, we will discuss the changes in Form ITR-1 as compared to the last year.

Major changes in the form –

This year Govt. has inserted a few more columns in the form
to check evasion and eliminate loopholes.
For example:
1. There shall be a separate column for standard deduction upto Rs.40000/- for salaried individuals.

2. Income from other sources shall be bifurcated in detailed manner.
For example- If Assessee has earned interest income then it has to be bifurcated into details like interest from saving bank account or post office or FDs or unsecured loans etc etc.

3. New section inserted for senior citizens – Sec 80TTB – which allows senior citizen to get deduction from interest income upto Rs. 50000/-.

4. Assessee has to furnish details of exempt income like HRA.

5. One cannot file his/her return in ITR 1 if

-his/her income from salary, pension and interest exceeds Rs. 50 lakhs or
– agricultural income exceeds Rs.5000/- or
– he owns more than one house property or
-he/she is a director in any company or
– have invested in unlisted shares or
– have capital income or losses.

Keep reading for regular updates.

That’s all !!

Thanks & regards,

CA Tanvi Gupta
ACA, B.com, DISA

Section 87A- Income Tax Act, 1961

Hey all!!

Section 87A… I guess everyone is talking about this section since the announcement in Interim budget (which we will discuss here only).

So the question arises- What is this section offering ??
Why should we have the knowledge about this particular section??
Who all will enjoy the benefits of this section??
What are the conditions to be fulfilled and so on…..??

Lets start from the very beginning.. this particular section or should i say This Popular section was introduced by finance ministry in finance bill 2013 and since then people are enjoying its benefits.

Section 87A (AY 2020-21 i.e. FY 2019-20)

This section provides tax exemption to assessee upto Rs. 12500/-.
This means you will be able to reduce your tax liability by Rs.12500/- at once.

But there are certain conditions to get the exemption –

  1. It is available for INDIVIDUAL assessee only.
  2. He/she should be a Resident in India.
  3. The TOTAL TAXABLE INCOME should not exceed Rs.5 Lakh.
  4. No rebate to Non-Resident.

POINTS TO BE TAKEN CARE OF-

  1. Please note that this rebate is to be subtracted from the TOTAL TAX PAYABLE and NOT From Total Taxable income of the Assessee.
  2. This is a rebate and not a deduction.
  3. Tax slabs are same as before. There is no change in the slabs.
  4. The basic exemption limit of Rs. 2.5 lakhs is still the same and its not changed to Rs. 5 lakhs (please dont misinterpret the amendment.

FOR EXAMPLE :-

Case 1 – Total taxable income is Rs. 495000/-

Tax computation will be like this:

Upto Rs. 2.5 lakhs Nil 0
Above 2.5 lakhs but upto 5 lakhs 5% 12250/-

Total tax payable : 0+12250 = 12250
Rebate u/s 87A (Max. 12500)= 12250
Net tax payable = NIL

Case 2- Total Taxable income is Rs. 505000/-

Tax computation will be like this:

Upto Rs. 2.5 lakhs Nil 0
Above 2.5 lakhs but upto 5 lakhs 5% 12500/-
Above 5 lakhs but upto 10 lakhs 20% 1000/-

Total tax payable – 0+12500+1000 = 13500
Rebate u/s 87A (Max. 12500) NOT AVAILABLE AS INCOME EXCEEDS
RS. 5 LAKHS
Tax payable = 13500
Add: EC & SHEC @ 4% = 540
NET TAX PAYABLE = 14040/-

So people save your tax accordingly.

Enjoy reading 🙂

Thanks,

CA Tanvi Gupta
ACA, DISA, B.com
Partner
M/s APMT & Associates

(9310009823)

Ways to save tax other than Section 80C

As the date 31st March comes closer tax assessees try to find different ways to save their hard-earned money from being taxed (of course in a Positive manner) and that’s why here  I am  for explaining various ways through which an assessee can save his/her tax lawfully.

Now whenever we talk about tax savings, we only think about LICs or Home loans or NSCs or FDs etc . and all these options come under Section 80C (quite popular) and that is why most of the assessees try to invest in these options only and limit their savings oninvestment upto Rs. 150000/- only.

But we need to think beyond section 80C, so that there might be an additional tax saving which might have been missed by many of us in earlier tax periods.

So here is the list of Investment options other than Section 80C which can help us save tax:

1. Section 80D: Popularly known as deduction for Mediclaim.

So as per this section an individual/HUF can insure his/her health both physically and financially.

As far as financial concerns, an individual/HUF can claim a deduction of Rs.25000/- for self, spouse and dependent children.

And additionally, Rs. 30000 for their parents too (if senior citizen; otherwise Rs.25000/-)

Note: The deduction for senior citizens has been increased to Rs.50000/- as announced in Budget 2018 (from FY 2018-19).

Note: payment should be made by any mode other than cash.

2. Section 80G: Popularly known as the donation deduction

It provided tax deduction if one has donated any amount to any NGO (Registered u/s 80G),

Or charitable trust or any Prime minister yojna etc.

There is a list mentioned on Income tax website.

Note: Payment should be made by any mode other than cash

Maximum deduction available would be 50% or 100% of the amount donated as per the case.

Please mention PAN of the Donee while claiming deduction.

3. Section 80GG: Popularly known as deduction for Rent paid

Usually people get HRA from their employers and get it deducted while filing ITRs. But in some cases when HRA is not a part of  the salary and rent is being paid for house then this deduction comes as a boon and one can easily claim a deduction here (some conditions need to be fulfilled)

Deduction shall be least of the following-

  1. 5000/- per month;
  2. 25% of the total income (some exclusions are there)
  3. Actual rent paid less 10% of the total income (some exclusions are there)

4. NPS Scheme: This scheme offers you additional tax deduction for Rs.50000/- other than Section 80C.

5. Section 80E: Deduction for interest paid on Educational loan – Best part is that there is no maximum limit. This deduction is available only for an individual.

Note: No Tax benefit is allowed for the principal repayment. (Maximum deduction period is 8 years)

6. Section 80EE: This is available to an individual for the amount paid as interest on loan taken for the purchase of a residential property. The maximum deduction that can be claimed under this section is Rs 50,000 per annum.

There are a few conditions one has to fulfil to avail this deduction (eg. Loan period April 2016 to March 2017, loan amount less than Rs. 35 lakhs, house value less than Rs. 50 Lakhs, should be the only house property in assessee’s name).

7. Section 80TTA: This section is for deduction on Interest earned on savings a/c. The maximum deduction is upto Rs. 10000/-. But this is not meant for interest earned on Fixed deposits.

Thanks & Regards,
CA Tanvi Gupta
ACA, B.com, DISA

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