Tax Exemption/deductions Rules in 2020
Income tax lies at the foundation of every functioning economy. It provides the resources a government needs to carry out essential operations and launch new initiatives. However, while paying applicable income tax is essential, it is just as essential to stay informed if your tax burden can be lowered. Every taxpayer is eligible to rightfully lower his or her tax burden by the means of tax exemptions.
What are Tax /deductions?
Tax deductions is a feature by which the tax burden of income or certain transactions can be reduced or completely removed. Taxpayers typically make certain investments with the purpose of availing deductions for these investments and thereby lowering their overall tax liability. Tax deductions, therefore, provide considerable relief to the taxpayers and allow them to legitimately reduce their taxable income.
New Tax Regime - Budget 2020
Until last year, a taxpayer could avail all applicable exemptions/deductions that he is eligible for as per the Income Tax Act and file his taxes under the standard slabs at the applicable rates. This system is still in place and the tax slabs and rates remain unchanged from last financial year.
However, Union Budget 2020 introduced an optional new tax system that offers varied tax slabs and lower tax rates to the taxpayer. The condition for availing these lower tax rates, however, is that the taxpayers cannot avail several of the most popular tax exemptions/deductions. These include deductions such as Section 80C and Section 80D.
Exemptions in New Tax Regime 2020
Having said that, there are various tax exemptions /deductions that are still available under the new tax regime. Hence, you can enjoy the lower tax rates of the new tax regime and avail the following tax exemptions:
While these are only the available exemptions under the new tax regime, all of the popular tax deductions, such as 80C and 80D, are still available under the old tax regime. At the end of the day, the taxpayer must determine for himself which tax regime best helps him lower his overall tax burden.
One of the most effective means of lowering your tax burden is by investing in a trusted term insurance such as the iSelect Star Term Plan, available on Canara HSBC Oriental Bank of Commerce Life Insurance . The premium payments made towards this term insurance will be eligible for exemptions under Section 80C for as much as Rs. 1,50,000. Moreover, the term plan also comes with a variety of add-on riders, such as Accident Death and Disability, to enhance your coverage better and protect your finances from the unexpected.-