HomeViews NewsBudget 2020: Taking a close look at the new income tax regime

Budget 2020: Taking a close look at the new income tax regime

In her second budget, the finance minister promised to make the taxpayer’s lives easy by introducing a new tax regime along with some other tax measures.  Let us understand the proposed changes in detail:

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By Rishabh Parakh  February 2, 2020, 9:28:35 AM IST (Updated)

Budget 2020: Taking a close look at the new income tax regime
In her second budget, the finance minister promised to make the taxpayer’s lives easy by introducing a new tax regime along with some other tax measures.  Let us understand the proposed changes in detail:


Introduction of a new tax regime

As per the new tax regime, in all, 70 tax exemptions will be removed with the new proposed tax rates. Please check the table below for the new tax rates:

income tax, income tax slab, budget 2020

In the new tax regime, most of the popular tax benefits which are available under various sections like section 80C (PF, PPF, Mutual funds ELSS, NPS or premium on your life insurance policies), Section 80D (health insurance premium) / 80DD, donations made under section 80G, all these will be gone. Likewise, the interest you pay on your home loan and the tax benefit on the allowances like LTA, HRA and the standard deductions will also not be available.

Now, whether the new tax regime will be helpful or not, each taxpayer needs to do his or her detailed tax calculation which depends on their overall income and investments. Those who have existing committed investments like their home loan or insurance policies and their provident fund contribution, etc. will need to analysis what will work for them meaning which tax regime is suitable for saving more taxes.

Taxing dividend in the hands of the taxpayer

The government has abolished the dividend distribution tax completely which means that every individual taxpayer has to pay the tax on their dividend income. Now, dividend from mutual funds or stocks will be taxable basis tax slabs applicable to an individual.

Steps to curb tax harassment: There will be a new tax charter which will be introduced aiming to reduce the tax harassment.

Faceless appeals: Department is making amendments in the I-T Act to permit faceless appeals.

Vivad se Vishwas scheme: Those taxpayers who have any ongoing tax appeals and the tax disputes, can now pay the disputed tax amount and save the complete interest and penalty provided if they pay the disputed tax on or before March 31,  2020.  The said scheme will remain open even after March 31, 2020 right till June 30, 2020 but by paying some additional amount.

Instant PAN: Now, you can get the allotment of PAN instantly basis your Aadhaar card verification.

Taxability on ESOPs: In order to help taxpayers who get major income in the form of ESOPs while working with the startups, the tax liability which arises thereon will be deferred by five years or in case the employee leaves the company or end up selling their shares, whichever event happens first. This was brought in to help them manage their cash flow smoothly.

Rishabh Parakh is a personal finance strategist and Chief Gardener of Money Plant Consultancy, an established firm providing tax and wealth management services across Maharashtra, Singapore and the UK.

Read his columns here.
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