New income tax slab 2020-21: After the Budget 2020 presentation, the Income Tax Department of India will have to give two options to taxpayers while income tax e-filing. One who wants to leave all income tax deduction can take the new one where one’s annual income up to Rs 5 lakh will be exempted from any kind of income tax while there is another option which is the old one where one can avail income tax benefits but in that case, one’s annual income of Rs 2.5 lakh will be free from any kind of income tax outgo. So, there is huge confusion as to one should go with the new income tax slab and lose all income tax exemption benefits or should continue with the old one and pay income tax above Rs 2.5 lakh annual income.
According to the tax and investment experts, a taxpayer falling in higher income groups should choose the old income tax slab because the old income tax slab can help them save money by lowering their income tax outgo. They said that if someone is in the lower-income group say Rs 8-10 lakh per annum, they should use the income tax calculator and asses their fund flow and investment. They went on to add that if a taxpayer is paying house rent, or home loan repayment then it would be advisable for them to go for the previous income tax slab instead of the new income tax slabs.
Speaking on the new income tax slabs Manikarna Singhal, a SEBI registered tax and investment expert said, “After the new income tax slabs being introduced in the budget 2020, an earning individual needs to do a comparative study of the two options by simply using the income tax calculator. They need to asses their investments, income tax benefits they are getting and the gross money they are saving in the older income tax slabs option. Similarly, they need to do the same in the new one.” Singhal said that in new income tax slabs if someone has higher income say over Rs 15 lakh and he or she is paying house loan EMI, tuition fee of the child and has enough of investments that meet the maximum limit, even then the new income tax slabs are better for him or her as in the old income tax slab, they will be paying 30 per cent income tax on income from Rs 10 lakh to Rs 15 lakh while in new norms, they will be paying Rs 20 per cent income tax on their income from Rs 10 lakh to Rs 12.5 lakh and 25 per cent on their income from Rs 12.5 lakh to Rs 15 lakh. So, in this income tax calculation, one will be able to save Rs 37,500 by opting for the second option of the income tax slabs.
Batting for the old income tax slabs for higher income group people SEBI registered tax and investment expert Jitendra Solanki said, “If someone is earning over Rs 15 lakh, then one’s mandatory Provident Fund (PF) contribution would be around 8 per cent of one’s basic. In that case, he or she would be reaching out around 50 per cent of the Section 80C annual limit already without any investment. If they have taken NPS and home loan then they can claim additional benefit on their income up to Rs 2.5 lakh more. Even when if we calculate their income tax outgo, their taxable income would be Rs 11,75,000 if they have savings of Rs 75,000 in Section 80C. In those circumstances, their income tax outgo will be 20 per cent on Rs 5 lakh to Rs 10 lakh and 30 per cent on Rs 10 lakh to Rs 11,75,000. So, the net income tax that a taxpayer would pay in new income tax slab is Rs 1,52,500.”
Solanki said that in the case of Rs 15 lakh income in new income tax slabs tax liability will be 10 per cent on Rs 5 lakh to Rs 7.5 lakh, 15 per cent on Rs 7.5 lakh to Rs 10 lakh, 20 per cent on Rs 10 lakh to Rs 12.5 lakh and 25 per cent on Rs 12.5 lakh to Rs 15 lakh. So, one’s net income tax outgo in the new income tax slab would be Rs 1,75,000, which is Rs 22,500 more.
Standing in sync with Manikaran Singhal; Solanki said that for those who are earning less than Rs 10 lakh, they need to asses one’s fund flow and net investment and the limit to which they can claim income tax benefit. Only then they should decide their income Tax slabs option.