Budget 2020 became taken into consideration to be unique in many ways. It become the first price range of the last decade 2020. Moreover it changed into the most predicted price range nowadays as Indian economy become grappling from a slowdown in the increase fee for more than one quarters. People were expecting sizable charge cuts in non-public income tax prices after a historic rate cut in Corporate Taxes on twentieth September 2019 to reinforce intake in the economy. However the Government did cut the tax fee however it did in an unprecedented way. The New Tax slabs and the caveats attached with them will effect Indian Society in the long run as the government wants to shift the financial system from saving oriented financial system to intake oriented financial system.
In other words, However, Honourable Finance Minister (FM) Nirmala Sitaraman in her budget has added a new taxation regime below non-public taxation. Instead of giving remedy to all of the Individual & HUF by means of increasing the tax slabs directly, Budget 2020 have proposed to introduce new segment 115BAC within the Income Tax Act 1961 in which Individuals or HUF have been given an option to give up numerous exemptions and get gain of lower tax prices. Following is the evaluation of the existing tax charges and the new tax slabs.
The new tax regime is however optional for the assessee. Individuals or HUF can pick to preserve to pay tax underneath the antique taxation device For instance,
|Incomes (In Rs )||Old Rates (In %)||New Rates (In %)|
|Upto Rs 2,50,000||NIL||NIL|
|RS 2,50,001 to Rs 5,00,000||5||5|
|Rs 5,00,001 to Rs 7,50,000||20||10|
|Rs 7,50,001 to Rs 10,00,000||20||15|
|Rs 10,00,001 to Rs 12,50,000||30||20|
|Rs 12,50,001 to Rs 15,00,000||30||25|
|Above Rs 15,00,000||30||30|
However new taxation regime comes with few caveats that are as under:
• Assessee shall must forgo plethora of deductions and exemptions granted underneath Income Tax Act 1961.
Salaried Assessees shall no longer be entitled to the following exemptions/ deductions as under:
• Leave tour concession as contained in clause (5) of phase 10;
• House hire allowance as contained in clause (13A) of phase 10;
• Some of the allowance as contained in clause (14) of section 10;
• Allowances to MPs/MLAs as contained in clause (17) of phase 10;
• Standard deduction, deduction for entertainment allowance and employment/expert tax as contained in segment 16;
• free food and beverage thru vouchers provided to the worker as notified in section 10(14).
Download And Prepare At a Time 100 Employees Automated Income Tax Form 16 Part B (Modified Format) [This Excel Utility Prepare At a time 100 Employees Form 16 Part B in New Format for A.Y. 2020-21]
The main feature of this Excel Utility:-
1) Prepare At time 100 Employees Excel Based Form 16 Part B ( Modified Format of Form 16 Part B Vide CBDT Notification No.36/2019 Dated 12/04/2019 ]
2) All the Amended Income Tax Section have in this utility as per Budget 2019
3) You can print individual Form 16 Part B
4) Most easy to install just like an Excel File
5) Easy to Fill the all column
6) Automatic Convert the Amount to the In-Words
However, few exemptions have been allowed below new tax regime below section 10(14) as underneath:
• Transport Allowance granted to a divvying worker to fulfill expenditure for the purpose of commuting between area of house and area of duty
• Conveyance Allowance granted to meet the expenditure on conveyance in performance of obligations of an office;
• Any Allowance granted to meet the fee of tour on excursion or on transfer;
• Daily Allowance to meet the regular daily costs incurred by means of an employee attributable to absence from his normal place of duty.
Assessee who’ve income underneath the top Profits & Gains from Business & Profession shall not be entitled take followings deductions/exemptions:
• Additional depreciation underneath clause (iia) of sub-section(1) of section 32;
• Deductions underneath section 32AD, 33AB, 33ABA;
• Various deduction for donation for or expenditure on scientific studies contained in sub-clause (ii) or sub-clause (iia) or sub-clause (iii) of sub-section (1) or sub-section (2AA) of phase 35;
• Deduction below segment 35AD or phase 35CCC;
• Exemption for SEZ unit contained in phase 10AA;
Provisions regarding AMT u/s 115JC and provisions referring to convey ahead and spark off of AMT credit, if any, u/s 115JD shall no longer apply to such individuals or HUF having enterprise or profession income.
General Deductions & Exemptions which any assessee shall need to forego is as Follows:
• Allowance for profits of minor as contained in clause (32) of section10;
• Interest underneath section 24 in recognize of self-occupied or vacant assets cited in sub-section (2) of segment 23. (Loss under the top income from residence belongings for rented residence shall not be allowed to be activate beneath any other head and could be allowed to be carried forward as in step with extant regulation);
• Deduction from own family pension beneath clause (iia) of section 57;
• Any deduction below chapter VIA (like Section 80C, 80CCC, 80CCD, 80D, 80DD, 80DDB, 80E, 80EE, 80EEA, 80EEB, 80G, 80GG, 80GGA, 80GGC, 80IA, 80-IAB, 80-IAC, 80-IB, 80-IBA, etc). However, deduction under sub-section (2) of section 80CCD (organization contribution as a consequence of employee in notified pension scheme) and section 80JJAA (for brand new employment) may be claimed.
• Individuals or HUF who do not have Business or Profession Income shall have the choice to select a brand new profits tax regime for each preceding year. For the alternative assessee, the option to select a new earnings tax regime best as soon as and it shall ought to be continued for all the preceding next years. They can be given an choice to choose out from the new Tax Once once the man or woman or HUF shall by no means be eligible to exercising option underneath this section, except wherein such man or woman or HUF ceases to have any enterprise or profession earnings Above all,
Download And Prepare At a Time 50Employees Automated Income Tax Form 16 Part B (Modified Format) [This Excel Utility Prepare At a time 50 Employees Form 16 Part B in New Format for A.Y. 2020-21]
The main feature of this Excel Utility:-
7) Prepare At time 50 Employees Excel Based Form 16 Part B ( Modified Format of Form 16 Part B Vide CBDT Notification No.36/2019 Dated 12/04/2019 ]
8) All the Amended Income Tax Section have in this utility as per Budget 2019
9) You can print individual Form 16 Part B
10) Most easy to install just like an Excel File
11) Easy to Fill the all column
12) Automatic Convert the Amount to the In-Words
Analysis Nirmal Sitaraman in her finances speech In addition, regarding the new tax regime as below:
“Currently the Income Tax Act is riddled with numerous exemptions and deductions which make compliance by the taxpayer and management of the Income Tax Act by the tax government a burdensome process. It is almost not possible for a taxpayer to comply with the Income-tax regulation without taking assist from professionals. In order to provide substantial remedy to the man or woman taxpayers and to simplify the Income-tax regulation, I recommend to bring a brand new and simplified personal earnings tax regime wherein income tax charges could be significantly decreased for the individual taxpayers who forgo certain deductions and exemptions.
In the new tax regime, massive tax advantage will accrue to a taxpayer depending upon exemptions and deductions claimed by using him. For example, someone incomes Rs 15 lakhs in a 12 months and not availing any deductions etc. Will pay most effective Rs 1,95,000 as compared to Rs 2,73,000 inside the old regime. Thus his tax burden shall be decreased by means of 78,000 within the new regime. He might still be the gainer within the new regime even if he become taking deduction of Rs 1.five Lakh under diverse sections of Chapter- VI-A of the Income Tax Act underneath the antique regime.
After that, based at the speech of the the Honourable Finance Minister, aim of the government for introduction of latest tax regime is clear
• Reduction in compliance value and ease of complexity for the Assessee
• Reduction in tax legal responsibility of the Assessee
But on analysing the supply of the new phase 115BAC, i.E. New tax regime, none of the above factors appears to get fulfilled.
Under the new taxation regime, Assesee shall ought to determine each year whether or not to retain with the old tax gadget or pick the more recent tax gadget. He shall need to calculate how much advantage he’ll get underneath the prevailing tax device with all deductions & exemptions towards the discount in tax liability under the new tax gadget by using forgoing numerous deductions & exemptions. It’s an excessive amount of to anticipate from a normal assessee to make such complicated calculations himself and make a decision. New tax regime have expanded the complexity in preference to simplifying it.
Download And Prepare One by One Automated Income Tax Form 16 Part B (Modified Format) [This Excel Utility Prepare One by One Form 16 Part B in New Format for A.Y. 2020-21]
The main feature of this Excel Utility:-
13) Prepare One by One Excel Based Form 16 Part B ( Modified Format of Form 16 Part B Vide CBDT Notification No.36/2019 Dated 12/04/2019 ]
14) All the Amended Income Tax Section have in this utility as per Budget 2019
15) You can print individual Form 16 Part B
16) Most easy to install just like an Excel File
17) Easy to Fill the all column
18) Automatic Convert the Amount to the In-Words
The instance given by the honorable FM of someone earning Rs 15 lakhs according to annum and highlighting a major tax saving of Rs 78,000 through comparing the tax legal responsibility below both present tax device and more recent tax regime with assumption that the assessee do now not avail any deductions and exemption. However the belief has itself a huge flaw. Out of all the 4.86 crore returns filed by way of the Individuals & Huf for the FY 19-20 till January 2020, there could be a really miniscule number of Assessees who may not have claimed any deduction or exemptions in any shape in their income tax returns. Many deductions are mandated by means of the statute e.G Contribution to Provident Funds by using the worker. Many of the deductions/exemptions are claimed by using the assessee for the expenses they will should incur for their livelihood eg. Paying hire and claiming HRA (in case of salary) or claiming deduction u/s segment 80GGA in case of other assessee. Almost all the assessee shall have at least one account in Saving Bank in which assessee will earn an interest and declare deduction u/s 80TTA. Hence a number of the deductions /exemptions claimed through the assessee are virtually for the prices which can be either mandated through a few other statute or they need to be incurred for the livelihood. We can say that some deductions/exemptions are not optional but necessary.
Let us apprehend the brand new tax regime with an example and additionally examine it with the prevailing tax machine.
Mr X is employed with ABC Limited. The salary shape for the FY 2020-21 is as underneath :
|Employees Contribution to Provident Fund||74,520|
Mr X additionally invested Rs 60,000 in Tax Saving Mutual Funds and pay coverage premium of Rs 14,000, health insurance premium of Rs 19,000. He pays lease of Rs 25,000 pm
He additionally earns hobby of Rs 5,500 on stability in saving financial institution account.
Mr X has also availed Housing Loan of Rs 50,00,000 on which he paid Rs 1,25,000 as interest and Rs 65,500 as main amount.
Calculation of Tax underneath each Tax Regimes:
Based at the Similarly, example, we are able to honestly see that the brand new tax regime is not useful to the assessee as he has to pay Rs 1,18,560 as tax even as if he comes to a decision to remain underneath the existing tax regime, he could now not should pay any tax at all.
Pros of New Income Tax Regime:
• There are chances that humans will stop buying insurance guidelines at the cease of the financial year just for the purpose of saving tax.
• Millennials will be the maximum beneficiary of the new tax regime as they dont have a tendency to store and make investments. With decrease tax on their income, they may have higher disposable earnings and they will boom the intake within the economic system.
Cons of the New Tax Regime:
• India is a rustic in which the government does now not sponsor social security to its citizens. There are few schemes by way of the government wherein free healthcare blessings, sponsored housing advantages and pension benefits are available to the residents of our country however there is an absence of absolutely advanced social security mechanism in India not like developed countries inside the world. Hence people should keep and make investments on their very own for his or her retirement. Various deductions underneath section 80C and phase 80D motivates and incentives humans to make investments with the aid of giving tax blessings. However below the new tax regime, and not using a incentive to keep and make investments for retirement, there are possibilities that humans, specially the more youthful generation, shall not shop for retirement and begin spending recklessly and will no longer be able to build sufficient retirement corpus and will grow to be 0 financial savings in future.
• The Government of India has a very ambitious dream of Housing for all till 2022. To accomplish this dream, the authorities is giving subsidy to first time homebuyers. However the authorities has taken a opposite stand under through now not allowing deduction of Interest on Housing Loan u/s 24(b) and principal part of housing loan underneath phase 80C, or stamp responsibility payment under phase 80C. Such provisions could be a roadblock for the government’s ambitious dream.
• In order to incentivise the acquisition of the electric car by using an character, the authorities in its Budget 2019, delivered segment 80EEB in which individuals can claim deduction of Interest Payment upto Rs 1,50,000 on loan taken for buying electric powered vehicles. But within the new tax regime, assessee will no longer be capable of claim this deduction. This will be a roadblock for the government’s efforts to push clean electricity and incentivise electric vehicles.
• Government has also disincentivized the producing activities undertaken through the people /Huf especially MSME units by now not allowing extra depreciation under segment 32(1)(iia) & deductions underneath section 35AD under the brand new tax regime. This will disincentivize new investments and expansions plans of the MSME sectors and indirectly have an effect on activity creation. We all know that msme is the key job creator in our country.
Download And Prepare One by One Automated Income Tax Form 16 Part A&B And Part B (Modified Format) [This Excel Utility Prepare One by One Form 16 Part A&B And Part B in New Format for A.Y. 2020-21]
The main feature of this Excel Utility:-
19) Prepare At time 100 Employees Excel Based Form 16 Part B ( Modified Format of Form 16 Part B Vide CBDT Notification No.36/2019 Dated 12/04/2019 ]
20) All the Amended Income Tax Section have in this utility as per Budget 2019
21) You can print individual Form 16 Part B
22) Most easy to install just like an Excel File
23) Easy to Fill the all column
24) Automatic Convert the Amount to the In-Words
• The new tax regime will be a large headache for the employers as their employees will have the option to pick out one of the tax system. The calculation of TDS can be greater tedious as there’s no readability from the government regarding how and while the declaration shall be taken from employees who want to choose a new tax regime.
• Individual and HUF with enterprise & profession earnings have no longer been given the choice to pick the brand new tax regime for every preceding yr in contrast to different Assessee. There become no such want to differentiate among assessees for the brand new tax regime.
Who will opt for New Tax Regime:
• Millennials who typically don’t save and invest can be the most important beneficiary of the brand new tax regime.
• Young Assessees who have started incomes lately and whose coverage guidelines and different tax saving investments are finished by their parents.
• Assessees whose are in high tax bracket however do not have investments options and other tax saving liabilities eg existing Home Loans, HRA etc
• Employees who are earning higher salaries and their employers are not chargeable for registration beneath EPF Act.
• Assessee who isn’t always into manufacturing business wherein he does now not have an choice to declare additional depreciation u/s 32(iia).
Suggestion to the government for making modifications in the new tax regime to make it greater practical and attractive.
• The Government has tried to put into effect the tax regime as counseled in the DTC code document submitted to the authorities in August 2019 which cautioned enormous changes in tax slabs and lower tax quotes and non New Tax slabs suggested as beneath:
Source : ET wealth
However implemented the suggestion half heartedly and gave an choice to pick to select a new tax regime with revised tax slabs and decreased tax liability however no deductions and exemptions. However the new tax slabs will growth the tax liability as opposed to lowering the same. Government should have adjusted the tax slabs underneath the brand new tax regime in a manner it ought to were tax neutral for the assessee. This ought to have simply made the tax machine for the taxpayers simple in genuine sense. With no deductions and exemptions to be claimed and paying tax on the real profits could have glad the government’s objective to clearly the earnings tax for a regular taxpayer and it can record the Income return with the aid of itself with out the assist of the expert.
• Government need to retain some of the deductions and exemptions which are mandatory for an assessee eg expert tax deducted from salary , worker contribution to provident fund etc. These deductions are mandated on the employees and in most of the cases are not non-compulsory. Such deductions should take delivery of to the assessee.
• Government must now not force the assessee to forgo all of the deductions beneath 80C. Government ought to have promoted term pure insurance plans preserving the deduction for the top class paid for the term insurance plans and not permitting charges for other styles of life coverage regulations. This step will discourage the mis –selling of insurance policies via the retailers who promote the endowment regulations which are embedded with the extremely low returns and assesses buy the same best for the tax gain purposes. Assessee will be inclined to split its coverage requirements needs from the funding goals and will look for better investment avenues.
• Government should allow deductions for interest on housing loans beneath segment 24(b) and major amount underneath phase 80C for the affordable housing schemes.
This will not derail the Housing for All vision of the authorities.
• Government have to also give assessee with commercial enterprise earnings an choice to choose the brand new tax regime every yr just like other eligible assessee and the restrict of allowing to pick out best as soon as ought to be eliminated.
• Government have to hold to permit deductions under section 80C by making an investment in tax saving mutual funds that allows you to deepen the capital market of India. Government might also growth the lock in period from three years to five years or 10 years with a view to make assessee stay invested and achieve the gain of the investment inside the capital market for an extended horizon.
• Government need to additionally permit deduction underneath phase 80D as healthcare value in India is rising swiftly and it’s far now a need to have medical health insurance in each family to safeguard in opposition to clinical emergencies.
For instance, Honorable FM in her budget speech have quoted as under:
“I even have reviewed all the exemptions and deductions which got incorporated inside the earnings tax legislation over the past numerous decades. It turned into sudden to understand that presently multiple hundred exemptions and deductions of different nature are supplied in the Income-tax Act. I even have removed round 70 of them in the new simplified regime. We will overview and rationalise the last exemptions and deductions inside the coming years so that it will further simplifying the tax machine and decreasing the tax price.”
Based on the above speech, we will effortlessly foresee the goal of the government that the brand new tax regime is going to stay and inside the coming years, the authorities may also step by step shift to a new tax regime with decrease taxes with lesser deductions and exemptions by using making the scrapping existing tax machine. The authorities has already brought similar tax structures for the organizations with the aid of introducing section 115BAA which gives option to the organizations of paying company tax at lower charges but will must forgo diverse deductions and exemptions. Similar provisions are delivered for Co-operative Societies in this price range with the aid of introducing section 115BAD. Assessees shall need to gradually rethink their investments and tax saving alternatives so that you can take maximum gain of the brand new tax regime Above all.