The Finance Minister has made interesting changes for individual income taxpayers by offering a different tax slab for those who forego all exemptions and deductions.

At the same time, the old tax structure will remain intact. This means that individual taxpayers will have two tax structure – based on exemptions and deductions.

Frist is the old one where the individual can continue with deductions and exemptions.

For those who would like to avail the new structure that has a lower tax rate, but with multiple slabs should abandon all exemptions and deductions.

The new structure for those who doesn’t claim any deductions and exemptions is as follows.

Personal Income tax slab for 2020-21 those who doesn’t claim any deductions and concessions
Tax Slab Tax Rate
Upto Rs 250000* Nil
Rs 250000 to Rs 5 lakh 5 %
Rs 500000 to Rs 7.5 lakh 10 %
Rs 7.5 lakh to Rs 10 lakh 15 %
Rs 10 lakh to Rs 12.5 lakh 20%
Rs 12.5 lakh to Rs 15 lakh 25%
Above Rs 15 lakh 30 %
*Rebate of Rs 5 lakh is applicable

The Rs 5 lakh rebate can be enjoyed for all independent of the tax package he receives.

The existing tax structure as follows can be used by those who opts for concessions and deductions.

Personal Income tax slab for 2020-21 for those who claim for exemptions and deductions
Tax Slab Tax Rate
UptoRs 250000* Nil
Rs 250001 to Rs 5 lakh 5 per cent
Rs 500001 to Rs 10 lakh 20 per cent
Above Rs 10 lakh 30 per cent
*Rebate of Rs 5 lakh is applicable

The budget 2020 retains the tax rates of PIT for those who avail the exemptions and deductions. There will be a Rs 5 lakh rebate.

For the super-rich, the surcharge will continue. Implication of this new tax structure is that there is Direct Tax Code recommendations are not implemented.

Difficulty of the new system

The new tax structure will be complex from the tax administration angle. Still, it may give more options to those who doesn’t use much deductions and concessions. Those who claim those have no option understandably, but to continue under the old scheme. Since majority of the salaried people avails exemptions, the new tax structure will not be attractive for them.

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