Everything you need to know about income tax slabs in India

On February, 1st, 2020, Finance Minister, Nirmala Sitharaman announced the Union Budget for the year 2020-2021. Given the economic slowdown, expectations were riding high and consumers sought tax relief in the form of lower tax rates and new tax slabs in order to boost disposable income and increase purchasing power.

What changes took place to income tax in Budget 2020?

Budget 2020 has changed the existing paradigm of taxation in a significant way. The Finance Minister proposed a new optional tax regime.

OPTION A

This tax regime came with new income tax slabs and lowered rates. However, this regime also comes with a reduced list of available deductions and exemptions.

Income tax slabs for FY- 2020-21 as per the new tax regime announced in Budget 2020, are as follows:

What this means:

1. No 80C or 80D benefits: If you are opting for the new tax regime, you will need to forego tax-saving benefits you could enjoy under section 80C and 80D of the ITA. You will not be able to claim the same tax deductions by investing in PF, NPS, ELSS schemes, life insurance, among others. Section 80D deductions on health insurance premiums, house rent allowance, leave travel allowance, etc will also not be available.

2. One tax exemption limit for all: Under the previous tax regime, senior citizens above the age of 60 years did not have to pay tax for income up to ₹3 lakh. This exemption limit was higher for super senior citizens, i.e those above 80 years of age at ₹5 lakhs. If a senior citizen or super senior citizen opts for the new system of paying tax, the exemption limit would be uniform across all age groups at ₹2.5 lakhs. However, a tax rebate of Rs. 12,500 is available for those with a net taxable income of up to ₹5 lakhs.

Know More About - Income Tax Slab For Senior Citizen

OPTION B

If you want to opt for the earlier tax system, your tax slabs would vary, depending on the age bracket you fall under. Let us take a look at income tax slabs for each of these categories below:

Individual < 60 years

Individuals between 60 to 80 years

Individual > 80 years

Tax Rebate: If your taxable income is below ₹5 lakh, you can enjoy a tax benefit of ₹12,500 under both the new and previous regimes. This is available as per Section 87A of the Income Tax act. ₹50,000 is also available to all taxpayers as a standard deduction for tax purposes for FY 2019-20.

While the new taxation system was introduced with the purpose of simplifying the taxation process, it will likely prove as complex, owing to the two different tax regimes offered to taxpayers. Taxpayers will have to compute their liability under each of the two regimes to understand which proves more beneficial.

Conclusion: For FY 2019-20, taxpayers will be able to avail of deductions and exemptions in the same manner. While filing taxes for FY 2019-20, it is important to do your tax planning well ahead of time and invest in instruments that help you create wealth, as well as save on tax. Invest 4G ULIP (Unit Linked Insurance Plan) from Canara HSBC not only helps your savings create wealth in the long term while providing financial protection, but it also offers several tax benefits. This tax saving plan also comes with 7 varied funds and 4 strategies to match your risk appetite. Nurture the dreams of you and your loved ones by making the right investment choices to help you create a secure future for your family.