Income Tax Slab for Financial Year 2020-21

Income Tax Slab for Financial Year 2020-21

Income Tax Slab for Financial Year 2020-21

Income Tax Slab for FY 2020-21

Finance Act 2020 has given an option (from two different tax slab) to individual taxpayer or HUF to pay tax at reduced rate if they don’t want to claim exemptions and deductions. Finance Act 2020 inserted a new section 115BAC which allows individual or HUF tax payers to choose any one option (either exiting income tax slab or proposed tax slab from Income Tax Slab for FY 2020-21) for filing income tax return. This option can also be claim by an individual who have income from business or profession. Taxpayer either can continue with current tax regime i.e. existing tax slab and can claim exemption/deduction or can opt for lower tax rate without Exemptions and Deductions. 

The option shall be exercised for every previous year where the individual or the HUF has no business income AND in all other cases the option once exercised for a previous year shall be valid for that previous year and all subsequent years.  Read which ITR is required to be filed by taxpayer 

The option (Proposed  Tax Slab) shall become invalid for a previous year or previous years, as the case may be, if the Individual or HUF fails to satisfy the conditions (i.e. claims any deduction in their ITR) and other provisions of the Act shall apply accordingly.

To claim lower tax rate under proposed income tax slab, following Exemptions/Deductions shall not be allowed:

  • Standard deduction of Rs. 50,000 u/s 16

  • House rent allowance u/s 10 (13A)

  • Leave travel concession u/s 10 (5)

  • Interest on housing loan u/s 24(b) on self occupied property 

  • No other deduction for allowances or perquisite

  • Deduction u/s 80TTA Interest on saving bank

  • Deduction u/s 80C for following

  • Life Insurance

  • Provident Fund

  • Mutual Fund

  • Repayment of Housing Loan

  • Deduction u/s 80D for Medical Insurance

  • So many other deductions/exemptions 

However following deduction will be allowed under proposed income tax slab:

  • Deduction u/s 24 (a): Standard Deduction for income from House Property

  • Interest on housing loan u/s 24(b) on let out property 
  • Deduction u/s 80CCD: Contributions made by the employer towards the NPS

  • Deduction u/s 80JJAA:  Deduction in respect of employment of new employees (available only to business income) 

Comparison between current income tax slab versus proposed tax slab (Income Tax Slab for Individual for FY 2020-21):

Income Tax Slab for New FY 2020-21New Tax SlabExisting Tax Slab
Up to Rs 2,50,000 NilNil
Rs 2,50,000 – Rs 5,00,000 5%5%*
Rs 5,00,000 – Rs 7,50,00010%20%
Rs 7,50,000 – Rs 10,00,000  15%20%
Rs 10,00,000 – Rs 12,50,00020%30%
Rs 12,50,000 – Rs 15,00,000 25%30%
Above Rs 15,00,00030%30%

* Deduction u/s 87A of maximum INR 12,500 shall be allowed if total taxable income is below 5,00,000 under existing tax slab. Hope you like our article on Income Tax Slab for Individual for FY 2020-21

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