A new tax regime
The finance minister announced a new tax regime. Under this optional new system, the taxpayers can get the following benefits:
a) Lower tax rates - Tax rates have fallen for everyone earning less than 15 lacs per annum. Look at the table below to find out your new tax slab:
| Income |
Old Tax Rate |
Current Tax Rate |
| Less than ₹2,50,000 |
Nil |
Nil |
| ₹2,50,000 to ₹5,00,000 |
5% |
Nil |
| ₹5,00,000 to ₹7,50,000 |
20% |
10% |
| ₹7,50,000 to ₹10,00,000 |
20% |
15% |
| ₹10,00,000 to ₹12,50,000 |
30% |
20% |
| ₹12,50,000 to ₹15,00,000 |
30% |
25% |
| ₹15,00,000 |
30% |
30% |
b) Simplified tax code - The tax code has been simplified, and the finance minister has claimed that pre-filled tax forms will be provided so that the taxpayers do not need assistance from a CA to file their tax returns.
There are, however, some caveats:
a) Exemptions and Deductions are gone - If people choose to file returns under the optional new system, they will have to forego the tax exemptions and deductions which are in place under the old system. Therefore, certain people may get greater tax savings under the older system.
There are, however, some caveats:
) Exemptions and Deductions are gone - If people choose to file returns under the optional new system, they will have to forego the tax exemptions and deductions which are in place under the old system. Therefore, certain people may get greater tax savings under the older system.
DDT is gone
DDT stands for Dividend Distribution Tax. At the end of every year, corporations distribute a percentage of their profits to their shareholders - this is known as the annual dividend. Before the 2020 budget, corporations had to pay a tax while distributing the dividend. The budget scraped this tax, thereby allowing corporations to pay healthier annual dividends to their shareholders from this year.
Retail investors - people who look to supplement their income by investing a part of their disposable income in the financial markets - will have these earnings taxed as per the income tax slab they fall under.
Tax deposit insurance limit goes up
Before the 2020 budget, a sum of 1 lac from every Indian’s bank deposit was insured from the harshest of bank crises by the government of India.
With this year’s budget, the government raised this limit five-fold - now 5 lacs from everyone’s bank deposits are insured by the government of India, and essentially protected from all sorts of economic shocks and bank crises. This should incentivize more people to put their hard-earned savings in banks.
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Travel will become easier
To boost domestic travel, the government announced a 5-year plan to build 100 new airports and get 150 new passenger trains running on the tracks. India is a vast country and this will improve the inter-connectivity of its far-flung regions. The common man will now find it easier to travel to different parts of the country, whether for leisure or work. This infrastructural spending is part of the National Infrastructure Pipeline, which aims to spend 1 lac crore on construction projects to take India’s annual GDP to 5 trillion dollars.
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Some items will be more expensive
There is a proposed hike in the custom duty for imported goods. The following imported items are slated to become more expensive in this financial year:
a) Gemstones like ruby and emerald
b) Furniture
c) Coffee and tea makers
d) Shoes
e) Imported wall fans - Tax raised from 7.5% to 20%
