Budget 2020: Income tax new Regime with an live example with a salaried person

Budget 2020: Income tax relief unless you take standard deduction, Section 80C and other tax benefits

There are many deductions, exemptions and 

concessions that the taxpayer has to give up which 

are currently available under Chapter VI-A of the Act

 or popularly known as 80 series.

union budget 2020 : key highlight

section 115 BAC

Sitaraman in her Budget 2020 speech has announced  an option for the taxpayers to reduce their income tax liability. As a taxpayer, he/she/it may continue with the current tax regime or choose the new tax regime which enable him to pay less tax. Though, the new tax regime comes with a less number of tax exemptions and concessions.

The new tax-paying option is introduced under section 115BAC in the Income tax Act 1961.

After satisfying certain conditions, an individual or HUF shall, from  the assessment year 2021-22 , has the option to pay tax in respect of the total income at the following rates:

Budget 2020

Total Income (Rs)

·         Up to 2,50,000 – Nil

·         From 2,50,001 to 5,00,000 5 per cent.

·         From 5,00,001 to 7,50,000 10 per cent.

·         From 7,50,001 to 10,00,000 15 per cent.

·         From 10,00,001 to 12,50,000 20 per cent.

•      From 12,50,001 to 15,00,000 25 percent.
•      Above 15,00,000 30 per cent.

There are many deductions, exemptions and concessions that the taxpayer has to give up which are currently embedded under Chapter VI-A other than the provisions of sub-section (2) of section 80CCD.

In a simple word

Taxpayer can't get the benefit under 

section  80C,

section 80D,

Section80DD

Section 80DD

Section 80DDB

Section 80E

Section 80EE

Section 80EEA

Section 80EEB

Section 80G

Section 80GG

Section 80GGA

Section 80GGB

Section 80GGC

Section 80IA

Section 80IAB

Section 80IAC

Section 80IB

Section 80IBA

Section 80IC

Section 80ID

Section 80IE

Section 80JJA

Section 80JJAA

Section 80LA

Section 80PA

Section 80RRB

Section 80QQB

Section 80TTA

Section 80TTB

Section 80U.

  Under section 80CCD (2), salaried employees can get the tax benefit on the employer contribution to his or her NPS or National Pension Scheme account. The contribution made by the employer up to 10 percent of salary (Basic + Dearness Allowance) can be claimed as a deduction from the taxable income under Section 80CCD(2). There is an unlimited upper cap in as the tax deduction. This deduction is over and above the ceiling limit of Rs 1.5 lakh provided under Section 80C and limit of additional Rs 50,000 under Section 80CCD(1B).

Following are Some important exemptions/ deductions not available 
under the new regime:

 ( section 115BAC )

(i) Leave travel concession as contained in clause (5) of section 10;

(ii) House rent allowance as contained in clause (13A) of section 10;

(iii) Some of the allowance as contained in clause (14) of section 10;

(v) Allowance for income of minor as contained in clause (32) of section 10;

(vii) Standard deduction, deduction for entertainment allowance and employment/professional tax as contained in
section 16;

(viii) Interest under section 24 in respect of self-occupied or vacant property referred to in sub-section (2) of section 23.

(Loss under the head income from house property for rented house shall not be allowed to be set off under any
other head and would be allowed to be carried forward as per extant law);

(ix) Additional deprecation under clause (iia) of sub-section (1) of section 32;

(x) Deductions under section 32AD, 33AB, 33ABA;

(xiii) Deduction from family pension under clause (iia) of section 57;

(xiv) Any deduction under chapter VIA (like section 80C, 80CCC, 80CCD, 80D, 80DD, 80DDB, 80E, 80EE, 80EEA,
80EEB, 80G, 80GG, 80GGA, 80GGC, 80IA, 80-IAB, 80-IAC, 80-IB, 80-IBA, etc). However, deduction under
sub-section (2) of section 80CCD (employer contribution on account of the employee in notified pension scheme) and
section 80JJAA (for new employment) can be claimed.

Also, the lower tax rate will be allowed without set-off of any loss,-

(i) carried forward or depreciation from any earlier assessment year, if such loss or depreciation is attributable to any of the deductions referred to in (a) above; or

(ii) under the head house property with any other head of income

Even in the new tax the regime, the following allowances will be allowed:

(a) Transport Allowance granted to a d employee to meet the expenditure for the purpose of commuting between place of residence and place of duty

(b) Conveyance Allowance granted to meet the expenditure on conveyance in the performance of duties of an office;

(c) Any Allowance granted to meet the cost of travel on tour or on transfer;

(d) Daily Allowance to meet the ordinary daily charges incurred by an employee on account of absence from his normal place of duty.

This amendment will take effect from 1st April, 2021 and will, accordingly, apply in relation to the assessment year 2021-22 and subsequent assessment years..

New Tax Regime vs Old Tax Regime which we have to choose?

if we go for  the new regime may provide 5% relief in some case for those earning between 6.5L to 15L or no relief at all. Suppose the total deduction 80C 1.5L + 0.5L (NPS)  + 0.25L (80D)  = 2.25L (HRA and others not included for simplicity)

Example 1

Salary  = 11L  .

New Tax Regime: Slab .  i.e tax        

(12500+25000+37500+20000)=                           95000

Old Tax regime. Salary  = 11L – 2.25L = 8.75L.                   . i.e tax  (12500+75000) =                                      87500

About Commerce Now

Hi, Myself CMA Mousam Roy having more than 5 years experience in commerce field,teaching field as well as professional field with working with PSU and big Firm.