INTRODUCTION
On 1st February 2020, the Hon'ble Finance Minister ('FM') of India Mrs. Nirmala Sitharaman unveiled the first budget of the 3rd decade of the 21st century. At a time when the Hon'ble FM was expected to extend benefits of lower income tax rates to individuals and mark the first steps to introducing a revamped Direct Tax Code ('DTC'), she managed to surprise everyone by introducing Section 115BAC in the Income Tax Act, 1961 providing an optional scheme to individuals to pay tax at a lower rate by not availing specified exemptions/ deductions.
NEW TAX REGIME
LOWERED TAX RATES
|
Taxable income (Rs.) |
Tax Rate (in case deductions and exemptions are availed) |
Tax Rate (in case deductions and exemptions are not availed) |
|
Below 2,50,000 |
0% |
0% |
|
2,50,000 - 5,00,000 |
5% |
5% |
|
5,00,001 - 7,50,000 |
20% |
10% |
|
7,50,001 - 10,00,000 |
20% |
15% |
|
10,00,001 - 12,50,000 |
30% |
25% |
|
Above 15,00,001 |
30% |
30% |
EXEMPTIONS/ DEDUCTIONS REQUIRED TO BE FOREGONE
OTHER ASPECTS
- Education Cess and Surcharge: The rates of education cess and surcharge are unchanged.
- Revenue foregone: The annual revenue foregone from the proposed tax reduction has been pegged at Rs. 40,000 crores.
- Set - off/ carry forward of losses: Set - off/ carry forward of losses attributable to specified exemptions/ deductions highlighted hereinabove or attributable to 'Income from House Property' shall not be permitted.
- Opting for lower tax rates:
-
- Assessee having no income from business: In the prescribed manner along with return of income to be furnished
- Assessee having income from business:
WHEN TO OPT FOR NEW TAX REGIME?
|
Gross Income (Rs.) |
Deductions (Rs.) |
Deductions (Rs.) |
Opt for new regime? |
|
5,50,000 |
25,000 |
20,000 |
✓ |
|
30,000 |
✕ |
||
|
6,00,000 |
50,000 |
45,000 |
✓ |
|
55,000 |
✕ |
||
|
6,50,000 |
75,000 |
70,000 |
✓ |
|
80,000 |
✕ |
||
|
7,00,000 |
1,00,000 |
95,000 |
✓ |
|
1,05,000 |
✕ |
||
|
7,50,000 |
1,25,000 |
1,20,000 |
✓ |
|
1,30,000 |
✕ |
||
|
8,00,000 |
1,37,500 |
1,32,500 |
✓ |
|
1,42,500 |
✕ |
||
|
8,50,000 |
1,50,000 |
1,45,000 |
✓ |
|
1,55,000 |
✕ |
||
|
9,00,000 |
1,62,500 |
1,57,500 |
✓ |
|
1,67,500 |
✕ |
||
|
9,50,000 |
1,75,000 |
1,70,000 |
✓ |
|
1,80,000 |
✕ |
||
|
10,00,000 |
1,87,500 |
1,82,500 |
✓ |
|
1,92,500 |
✕ |
||
|
10,50,000 |
1,87,500 |
1,82,500 |
✓ |
|
1,92,500 |
✕ |
||
|
11,00,000 |
1,87,500 |
1,82,500 |
✓ |
|
1,92,500 |
✕ |
||
|
11,50,000 |
1,87,500 |
1,82,500 |
✓ |
|
1,92,500 |
✕ |
||
|
12,00,000 |
1,91,667 |
1,86,667 |
✓ |
|
1,96,667 |
✕ |
||
|
12,50,000 |
2,08,333 |
2,03,333 |
✓ |
|
2,13,333 |
✕ |
||
|
13,00,000 |
2,16,667 |
2,11,667 |
✓ |
|
2,21,667 |
✕ |
||
|
13,50,000 |
2,25,000 |
2,20,000 |
✓ |
|
2,30,000 |
✕ |
||
|
14,00,000 |
2,33,333 |
2,28,333 |
✓ |
|
2,38,333 |
✕ |
||
|
14,50,000 |
2,41,667 |
2,36,667 |
✓ |
|
2,46,667 |
✕ |
||
|
Above 15,00,000 |
2,50,000 |
2,45,000 |
✓ |
|
2,55,000 |
✕ |
CONCLUSION
While the intent of the Hon'ble FM, in her budget speech, had indicated the simplistic nature of the new tax regime and claimed that individuals may not require services of a professional to file their income tax returns in case they opted for the new scheme, the individuals may still face a dilemma on whether or not to opt for the new tax regime. In such a scenario, whether the new tax regime is really 'simple' or not is anyone's guess.
The author is a Chartered Accountant working freelance in the fields of direct and indirect taxation as well as assisting other Chartered Accountants with practice management and training on taxation as well as application software such as Microsoft Excel and TALLY ERP 9.
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