Comparative analysis on budget 2020 for Salaried Individual

Susmita Dutta, CA , CPA , Last updated: 05 February 2020
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Under New Tax Regime

Comparative analysis on budget 2020 for Salaried Individual

Case I - Salaried individual those who are not claiming any exemptions or deductions					Amount (Rs.)

Gross salary	750,000	1,000,000	1,250,000	1,500,000	2,000,000

Tax
Rs.2,50,001-5,00,000 5%	12,500	12,500	12,500	12,500	12,500
Rs.5,00,001-7,50,000 10%	25,000	25,000	25,000	25,000	25,000
Rs.7,50,001-10,00,000 15%		37,500	37,500	37,500	37,500
Rs.10,00,001-12,50,0000 20%			50,000	50,000	50,000
Rs.12,50,001-15,00,000 25%				62,500	62,500
Rs.15,00,001-20,00,000 30%					150,000
Tax Payable	37,500	75,000	125,000	187,500	337,500
Health Education Cess 4%	1,500	3,000	5,000	7,500	13,500
Total Tax Payable	39,000	78,000	130,000	195,000	337,500

Existing Tax Regime

Case I - Salaried individual those who are not claiming any exemptions or deductions					Amount (Rs.)
Gross salary	750,000	1,000,000	1,250,000	1,500,000	2,000,000

Tax
Rs 2,50,001-5,00,000 5 %	12,500	12,500	12,500	12,500	12,500
Rs.5,00,001-10,00,000 20%	50,000	100,000	100,000	100,000	100,000
Rs.10,00,001-and above 30%			75,000	150,000	300,000
Tax Payable	62,500	112,500	187,500	262,500	412,500
Health Education Cess 4%	2,500	4,500	7,500	10,500	16,500
Total Tax Payable	65,000	117,000	195,000	273,000	412,500
Excess Tax in new Regime	(26,000)	(39,000)	(65,000)	(78,000)	(75,000)

Case II - Salaried individual claiming only deductions or exemptions. under sections 80C, 80D and standard deduction					Amount (Rs.)
Gross salary	750,000	1,000,000	1,250,000	1,500,000	2,000,000
Less: Standard Deduction	50,000	50,000	50,000	50,000	50,000
Total Income	700,000	950,000	1,200,000	1,450,000	1,950,000
Less: 80C	150,000	150,000	150,000	150,000	150,000
80D	25,000	25,000	25,000	25,000	25,000
Net Total Income	525,000	775,000	1,025,000	1,275,000	1,775,000
Tax on Total Income	17,500	67,500	120,000	195,000	345,000
Health Education Cess 4%	700	2,700	4,800	7,800	13,800
Total Tax Payable	18,200	70,200	124,800	202,800	358,800
Excess Tax in new Regime	20,800	7,800	5,200	(7,800)	(21,300)

Case III- Salaried individual claiming more exemptions/deduction, i.e. under sections 80C, 80D, standard deduction and HRA exemption					Amount (Rs.)

Gross salary	750,000	1,000,000	1,250,000	1,500,000	2,000,000
Less: HRA	150,000	200,000	250,000	300,000	350,000
Less: Standard Deduction	50,000	50,000	50,000	50,000	50,000
Total Income	550,000	750,000	950,000	1,150,000	1,600,000
Less: 80C	150,000	150,000	150,000	150,000	150,000
80D	25,000	25,000	25,000	25,000	25,000
Net Total Income	375,000	575,000	775,000	975,000	1,425,000
Tax on Total Income	6,250	27,500	67,500	107,500	240,000
Rebate U/S 87A (For income upto Rs 5 lakhs Tax Rebate upto Rs 12,500)	6,250
Health Education Cess 4%	-	1,100	2,700	4,300	9,600
Total Tax Payable	-	28,600	70,200	111,800	249,600
Excess Tax in new Regime	39,000	49,400	59,800	83,200	87,900

Note:

1. If the salaried employee is claiming deductions under section 80C, 80D (medical premium), HRA exemption, LTA exemption and deduction of interest paid on housing loan taken for self occupied property up to permissible limits, he is likely to be better off in the existing personal tax regime. A high earner claiming only these deductions is likely to save tax under the new regime but lower income earners up to gross salary of Rs 12.5 lakh will end up paying more tax. To see if the new regime is beneficial, each individual will have to make their own comparative calculations. It will depend on the level of deductions and exemptions you are claiming at the moment.

2. This new tax regime is the option to those people who are unable to avail exemptions or deductions. Those who are new in job,one who has not yet planned to buy a house, he might be putting little money in PF (provident fund) and insurance. He may find that, depending on his income, this new scheme is better.

3. A person can freely opt in scheme and opt out of the scheme. The tax Rates will be applicable as per the Option exercised at the time of filing of Return every year. Income Tax Return has to be filed by Due Date. If ITR is late, then Tax payable at Normal rate.

The author is a member of the CPA Institute, Australia and member of Institute of Chartered Accountants of India and can also be reached at casusmitadutta@gmail.com.

Disclaimer: The facts and opinions written in this column are those of the author and have been prepared on the basis of relevant provisions and information available at the time of preparation. The article does not constitute any professional advice or a formal recommendation. The author has undertaken the utmost care to disseminate true and correct views and does not accept liability of any errors or omissions.