Budget Changes for FY 2020-21

Created by Raghul David, Modified on Wed, 9 Jul at 2:13 PM by Product Content Team

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:

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.
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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