The Budget 2020 was deemed as a Do or Die Budget for the Incumbent Finance Minister Nirmala Sitharaman. Considering the recent Economic Slowdown, the Budget was expected to provide relief for the Tax Payers.
There we have it… The Budget has been announced and New Tax Reforms have been made. Let’s take a look…
Personal Income Tax Slab!
The FinMin took a mid-route on the much-awaited Income Tax Slab rate. FM Nirmala Sitharaman gave taxpayers 2-options(or are these “options” creating more confusion?).
1. Claim deductions and pay tax under the Older Income Tax slab rate.
2. Don’t claim deductions and pay tax as per the New Income Tax slab rates. The new Income Tax Slab rates are:
- INR 2.5 Lakh – INR 5 Lakh 5% Tax: Individuals earning between INR 2.5 Lakh — INR 5 Lakh will get a complete rebate. The Tax Cut s particularly beneficial for the Middle class as India, since a huge number of citizens who earn between INR 2.5 Lakh- INR 5 Lakh.
- INR 5 Lakh- INR 7.5 Lakh 10% Tax: Contrary to the previous tax regime, the new tax regime eases Tax Pressure on Citizens as the Slabs have been reduced. Now you will be required to pay INR 12,500+ 10% Tax on income earned between INR 5 Lakh- INR 7.5 Lakh.
- INR 7.5 Lakh- INR 10 Lakh 15% Tax: Individuals earning between this slab will need to pay 37,500+ 15% Tax on income earned between INR 7.5 Lakh- 10 Lakh.
- INR 10 Lakh- INR 12.5 Lakh 20% Tax: Taxpayers earning between this slab will be entitled to pay 75,000+ 20% Tax on income earned between INR 10 lakh- 12.5 Lakh
- INR 12.5 Lakh- 15 Lakh 25% Tax: Anyone earning between INR 12.5 Lakh-INR 15 Lakh will need to pay the Government INR 1,25,000+ 25% Tax.
- INR 15 Lakh and Above 30% Tax: The Tax for this slab hasn’t changed and it remains the same as the Old Tax Regime i.e 30%. However that Calculations would be INR 1,87,500 + 30% Tax on income above 15 Lakh.
Under the New Tax Regime announced, the taxpayer can choose which Income Tax slab rate should their income be taxed. However, they might have to forgo the deductions they can claim.
Contracting the Deductions
From available deductions have been reduced from previously 100 to now early 30. That was a real Shocker!
FinMin announced that Individuals opting for New Tax System will not be able to claim Deductions. But, if you choose to follow the Old Tax System, you will still be able to claim deductions. This is made people thinking as to what tax system is better for them?
Dividend Distribution Tax abolished
The controversial DDT, which companies had to pay on Dividend Distribution to shareholders, is abolished.
The dividend is now taxable for the shareholders. Failing to do so would mean that violators will receive Income Tax Notices.
According to Nirmala Sitharaman, “GST has integrated the country economically”. Announcements made in Budget 2020
- SMS based NIL returns can now be filed for GST.
- Simpler/Automated way to file GST return will be introduced from April.
- GST Collections crosses INR 1.1 Lakh crore in January
Three Spearhead Schemes for India
The Finance Minister announced three Schemes under which the Budget was classified.
- Focus is on Agriculture, Rural Development, Education, Sanitation
- PM KUSUM to cover 20 lakh farmers for stand-alone solar pumps and further 15lakhfor grid-connected pumps
- For seamless logistic, “Kisan Rail” and “Krishi Udaan” have been introduced
- Agriculture credit target set at INR 15 Lakh Crore for 2020–2021
- Raise Fish Exports by INR 1 Lakh Crore by 2024–2025
- A goal of doubling the income of farmers by 2022
- About 150 higher educational institutions will start apprenticeship embedded courses
- Internship opportunities to fresh engineers by urban local bodies
- INR 12,300 crore for Swacch Bharat
- INR 99,300 crore for Education Sector
- Scheme to encourage the manufacturing of mobile phones, electronic equipment, and semiconductor packaging
- Allocating INR 23,000 Crore for Industrial Development
- Allocating INR 100 Lakh Crore for investments in Infrastructure by 2025
- Plan of Building 100 New Airports by 2024.
- INR 1.7 Lakh Crore to be allocated for betterment of Transport Infrastructure by 2021
- Nearly 1 Lakh Panchayats to be connected by optical fiber
- INR 8,000 crore announced for the Quantum Technologies and applications.
- More than 6 lakh Aanganvadi workers to be equipped with smartphones
- INR 85,000 crore allocated for the betterment and upliftment of Schedule Tribe and Schedule Class
- INR 35.600 Crore for the fight against malnutrition
- INR 9,000 crore allocated for the welfare of Senior Citizens
- Plan to build 100 more hospitals in Lower-tier cities
- INR 4,400 crore to be allocated to fund programs to purify the air quality
I feel that contrasting to what Finance Minister wanted to do with this Budget, the effect is entirely opposite. She aimed to simplify Income tax but ended up making it more confusing. There are discussions everywhere as to what is the better way to file Taxes…With or Without Deductions?
If individuals decided to pay taxes without claiming deductions under “New Regime”, they will end up paying more. Then again, it all boils down to what your personal finance goal is?