TAX ANALYSIS 2020-2021

TAX ANALYSIS   2020-2021

Budget might seem all about spurring economic growth, but hidden amid the economics is political messaging; something that was on display in finance minister Nirmala Sitaraman budget speech.

We can say tax is center of the budget.

GST (goods and service tax) is one of the most awaited law which upon introduced will boost the economic growth in the country. this  tax has a slogan called “one nation ,one tax .”GST eliminates middle man in the modern market.

Income tax slab for 2020-2021

15% income tax where total income exceeds Rs.1,00,00,000.

Health and education cess 4% income tax and surcharge.

Budget 2020-2021 has a new tax regime for tax payers, lower rates for people

Foregoing exemptions.

The new tax regime comprise of new slabs and slashed income tax rates for different slabs for an individual income of up to Rs.15 lakhs per annum , if a tax payers opts for foregoing exemptions and deduction.

Intending to reduce the rates and simplify the structure. Finance minister Nirmala Sitaraman on February 1 announced a new regime of personal income tax. The new tax regime comprises of new slabs and slashed income tax rates for different slabs for an individual income of   up to Rs.15lakh per annum. If a tax payer opts for foregoing exemptions and deductions. The new tax regime offers lower tax rates and new slabs and simultaneously removes tax exemptions and will result in lower. Tax outgo for the tax payer, according to the finance minister. Nirmala Sitaraman.

Under the new proposal, the tax structure   will be as detailed in the table below;

Taxable income slab         existing tax rates       new tax rates

(Rs.)                                            (Rs.)                         (Rs.)

 0 _2.5 lakh                          exempt                        exempt.                                                                                               

5 -7.5 lakh                             20%                              10%

7.  -10 lakh                            20%                              15%

10 -12.5 lakh                         30%                              20%

12.5 -15 lakh                         30%                              25%

15 lakh and above                30%                              30%

However, the new tax regime will be optional, and the tax payers will be given.

 A choice 10 either remain in the old regime with exemptions and as proposed.

In the new tax regime .70 tax exemption will be removed in the new system, but the tax benefit on retirement money, VRS, NPS and some of the other categories   will continue for those in the new scheme. The proposal would lead to a revenue sacrifice of Rs.40000 crore per annum. 

Which tax regime -old or new- would be beneficial, that is   result in lower tax 

Payable for each individual is likely to depend on his/her income composition and investments are done. Each individual will have to do their income calculations to figure out which tax regime is more beneficial to them.

For instance, a person earning an income between 3.5 to 5lakh will not witness any changes in the income, tax slab as there are no changes in it.

However, if a person is earning Rs.5.5 lakhs in a year and not availing any deduction will pay Rs.18200 as per the new tax regime compared to an almost nil amount due to the exemptions such as polices and insurances as per the old tax regime. Therefore, in such case, the old tax regimes beneficial. Deduction or opt for the new reduced tax rate without those exemptions.

 

Meanwhile, if a person is earning Rs.15 lakh in a year and not availing any deduction, etc. will pay only Rs.1,95,000 as per the new tax regime as compared to Rs.2,73,000 in the old tax regime.

Finance minister is also informed that the government has followed the same pattern as to when the corporate tax was reduced last September, and there was a scheme for those who were looking for a simplified structure while others could continue with exemptions.

 

Additionally, in a bid to save the tax payer from harassment, the centre is also proposed a mechanism to address the issue in the union budget 2020.

 

Income between 5-7.5 lakh for 10% tax rate.

Income between 7 -10 lakh for 15% tax rate.

Income between 10 -12.5 lakh -tax rate brought down to 20% from.

 

 

Here by I conclude my presentation with a small opinion,

 

Budget will help the India to come out of recession. The union budget will boost Indian economy by helping the market to come out of deflationary recession.

The government move, to abolish dividend distribution tax. It will boost investors sentiment. This facilitates increased profit distribution to the investors.

By this, the investors will have increased spending ability. As we all know, one person`s spending is another person`s income.

Finance minister increasing the tax deduction limit to Rs.3.5 lakh from the present Rs.2 lakh, on the interest paid. On affordable housing loan sanctioned during this financial year, is also a good move.

Also increasing the carpet area limit from 30sq/ meters to 60sq/ meters in metropolitan region, and from 60sq/ meters to 90sq/meters in non-metropolitan area, is also a decent proposal.

“The silver liming is the market, still is buyer market and economy of  India will soon enter the phase of normalization.

                                                                                                    -SUDHA