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5 new income tax rules after Budget 2020 explained here

5 new income tax rules after Budget 2020 explained here

In Budget 2020, Finance Minister Nirmala Sitharaman announced new income tax rates and slabs for those earning up to ?15 lakh a year. These new tax rates are optional and will be applicable for those foregoing exemptions and deductions. The finance minister also proposed to remove dividend distribution tax on companies. These new income tax-related proposals will come into effect from the financial year 2020-21. 1) It is to be noted that the new income tax rates and slabs will be applicable for those who forego exemptions and deductions.

The deductions include Standard deduction, Section 80C, Section 80D, LTA, HRA, interest on housing loan on the self-occupied property among others. The maximum benefit under this tax rate will be ?78,000. The new rates will be optional. Individuals can continue to pay at older rates. Tax experts say that individuals will have to check if they will have greater benefits under the new tax rates. It depends on a case to case basis. However, individuals with business income cannot switch to the new tax rates and then back again to the old rates. But others can do so. New income tax slabs

  • 0 - 2.5 lakh - exempted
  • ?2.5 lakh - ?5 lakh - 5%
  • ?5 lakh - ?7.5 lakh - 10% (20% earlier)
  • ?7.5 lakh - ?10 lakh - 15% (20% earlier)
  • ?10 lakh to ?12.5 lakh - 20% (30% earlier)
  • ?12.5 lakh - ?15 lakh - 25% (30% earlier)
  • No change in tax rates above ?15 lakh

2) Currently, companies are required to pay dividend distribution tax (DDT) on the dividend paid to its shareholders at the rate of 15% plus applicable surcharge and cess. This is in addition to the tax payable by the company on its profits. According to the new rules, the dividend shall be taxed only in the hands of the recipients at their applicable rate. Earlier, dividend income above ?10 lakh was taxable in the hands of recipients at the applicable rate. 3) To promote affordable housing, Sitharaman extended the date for availing additional tax benefits on the purchase of new houses (up to 45 lakh) by a year to March 31, 2021.

House owners who have taken loans to purchase homes up to 45 lakh are now eligible to claim an additional tax deduction of 1.5 lakh. This will be in addition to the 2 lakh deduction which is available to house owners who brought affordable housing on loans borrowed up to March 31, 2020. 4) High earners will have to shell out tax on employer's contribution under employees' provident fund (EPF), National Pension System (NPS) and superannuation fund if it exceeds the cumulative upper ceiling of 7.5 lakh per year. 5) Besides the income tax on the employer's contribution, if the cumulative amount exceeds 7.5 lakh, annual accretion by way of interest or dividend will also be taxable.

Source: livemint

 

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