Introduction of New Tax Regime in 2020

This Synopsis is on introduction of “New Tax Regime” as the Finance Minister of India presented the Union Budget for the financial year 2020-21.

The most prominent tax reform is the amendment of a new income tax regime. Previously, taxpayers with taxable income in the range of Rs 5 lakh to Rs 10 lakh were taxable at the rate of 20%.

The Fin. Min. has taken a testing step for them. The Union Budget 2020 has announced a new tax regime under which the following income tax slabs are announced:

Existing Tax Rate	New Tax Rates
Up to Rs 2.5 L – No Tax	Up to Rs 2.5 L – No Tax
Rs 2 L to Rs 5 L – 5%	Rs 2.5 L to Rs 5 L – 5%
Rs 5 L to Rs 10 L – 20%	Rs 5 L to Rs 7.5L – 10%
Rs 10 L and above – 30%	Rs 7.5 L to Rs 10 L – 15%
	Rs 10 L to Rs 12.5 L – 20%
	Rs 12.5 L to Rs 15 L – 25%
	Rs 15 L and above – 30%

The new tax regime, as mentioned by the Finance Minister, will not cover popular deductions and exemptions such as House Rent Allowance (HRA), Leave Travel Allowance (LTA), standard deduction, interest paid on home loan, Chapter VI A other than 80CCD and 80JJA, and so on.

However, the new tax regime is optional, and the conventional income tax slabs with higher tax rates will still continue to exist. The taxpayers must fulfill several conditions in order to avail the benefit of the new tax regime. 

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