Know about the New Tax Regime that Came Into Effect from 1st April 2020

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What Reforms are Covered Under IT Slabs for AY 2020-21?

The Union Budget 2020 has introduced a new income tax slab by reducing income tax rates and rearranging them to lower the tax liability of individuals. This new income tax regime is optional and will coincide with the old one with the three income tax slabs and different exemptions that apply to the taxpayer. This new income tax slab has been effective from this year.   

Finance Minister Nirmala Sitharaman has introduced an optional income slab system for individual taxpayers who are less than 60 years of age. According to this new slab system, you  can select to file your income tax under either of the two slab systems. 

As per the new tax regime, the tax exemption limit mainly depends on an individual’s age and residential status. Depending on their age, the taxpayers are divided into three categories.

• Individuals under the age of 60 years
• Senior citizens in the age bracket of 60-80 years
• Super senior citizens above the age of 80 years

Mentioned below are the various income tax slabs as per the latest Income Tax Slab for the AY 2020-21.

 These new tax rates are applicable to those who do not want to get specified exemptions or deductions. The lower tax rates will be applied to the total income without any benefit of deductions and exemptions. The deductions that are not allowed in this regime are as follows:

• Standard deduction from salary
• Housing Loan Interest
• Leave Travel Allowance
• House Rent Allowance

Deductions as per Chapter VI A of the Income Tax Act, 1961 such as Section 80 CCC(pension premium), 80D(health insurance premium) and 80 TTA(Bank interest). Mentioned below is the income tax slab for individuals below the age of 60 years:

The below tax slabs is similar for the ones in the age group of 60-80 years. 

 The below tax slab is for the super senior citizens above the age of 80 years 

 Anyone earning up to Rs.7,50,000 per annum, the revised tax structure works well, considering that there is a 10% decrease in the tax charge, which is more than Rs. 5,00,000. Those earning a higher income may avail tax exemptions as per the old tax structure. It mainly depends on an individual’s ability to invest across all tax-saving instruments. 

>> Also read how health insurance is a tax bonanza for you

Final Word

The Union Budget has provided a new tax regime for individuals to opt for tax benefits without claiming any deductions. It will be important for the working-age group to focus on their savings for their future needs, such as children’s future and post-retirement life. Also, you  need to safeguard your family’s health. 

Individuals can calculate their income tax after considering these income tax slabs and how they work. You can also save income tax by investing in a health insurance policy. A health insurance policy helps you in saving tax annually. As per the Section 80D of the Income Tax Act, you can avail tax exemption depending on the premium paid for a health insurance plan.The coverage provided by a health insurance policy can be availed by you and your family members. This will help you in your savings and you will also get tax benefit.

Disclaimer: The above information is for reference purposes only. The medical insurance tax exemption are subject to the rules and regulations of the Income Tax Act of India 1961.