From the financial year (FY) 2020-21, an individual taxpayer has to choose between the new income tax regime (without tax-exemption and deductions) and the existing tax regime (with existing tax deductions and exemption).
Given below are answers to some of your queries related to the new regime.
1. Is there any deduction that can be claimed under the new tax regime?
Yes, the new income tax regime allows a deduction under section 80CCD (2) of the Income-tax Act, 1961. This deduction is available if an employer contributes to an employee’s NPS account. An employee can claim a maximum deduction of 10 percent of salary (Here, Salary = Basic Salary + Dearness Allowance).
2. Does the new tax regime offer a higher tax-exemption limit on income on the basis of age?
No. Unlike the existing regime which offers a higher tax-exemption limit for senior citizens and super senior citizens, the new tax regime does not offer a higher tax-exemption limit on income.
3. If I opt for a new regime and my total taxable income in FY 2020-21 is Rs 4.95 lakh. Do I have to pay tax on it?
The new income tax regime also offers a maximum tax rebate of Rs 12,500 under section 87A of the Income-tax Act. Therefore, an individual is not required to pay any tax on income up to Rs 5 lakh in FY 2020-21 under the new tax regime.
4. How can an individual arrive at net taxable income?
To reach net taxable income, for an FY, an individual first needs to calculate the total of all incomes which are taxable. Then, an individual needs to total the number of deductions that an individual is eligible to claim in an FY. To arrive at net taxable income, one needs to deduct the total amount deductions from the total taxable income.
5. How do I know in which tax slab is applicable to my income?
The total tax liability is calculated on the basis of your net taxable income falls into a particular tax slab. As your income increases, income at different levels will be taxed at different tax slab rates. Click here to read more about it.