Things to know about the new 2020 tax regime

What to expect from the new tax regime

Monday, 27th April 2020

The new income tax regime 2020 is already here and most of us are aware of what it includes. The good thing about the new regime is that it includes much lower tax rates but the not-so-pleasant side is that there are just a limited number of exemptions & deductions. As per the new regime rules, you’ll not be able to claim exemptions such as the interest on housing loan or HRA; i.e. exemptions that amount to notable figures.

To know more about the new financial year’s new tax regime, read on…

Deductions

Deductions under the section 80CCD (2) of the 1961 Income Tax Act is applicable in case of the new regime. Only, if your employer is contributing to your NPS account, these deductions will be available to you. You, as an employee, can claim a maximum deduction of 10%of the salary you earn. Here ‘salary’ stands for your basic pay plus the dearness allowance.

Exemptions

Tax exemptions with regard to senior citizens (aged 60 years & more but below 80 years of age) and super senior citizens (aged 80 years & more) are not available in case of the new regime and that’s where this new 2020 tax regime differs largely from the current tax regime.

Tax rebate based on income

You are entitled to get up to Rs 12, 500 as tax rebate under the section 87A of Income Tax Act. Thus, if you are earning up to a sum of 5 lakhs in the 2020-21 Financial Year, you’ll not have to pay income tax in case you opt for this provision.

Declaration form needed to inform employer

If you want to avail the new 2020 tax regime, you have to let your employer know about your wish through a declaration for. If you fail to inform your employer, you’ll be taxed according to the old regime like always.

Cannot switch tax regimes in a financial year

Once you have opted for the new tax regime you’ll have to stick to it for the entire financial year with regard to TDS matters and cannot change from one regime to another in the course of the financial year.

Source: Economic Times