New Income Tax Slabs: Good News for those on rent! This tax exemption can still be claimed
New income tax slabs 2020 allows a taxpayer to claim the standard deduction on house rent being paid in the assessment year, says Money Bill 2020.
Income Tax Slabs: After the introduction of new income tax slabs option in Income Tax for AY20-21, a lot of confusion has been generated regarding the tax benefits that would continue and those that would stop. This means taxpayers are not sure whether they should go with the older income tax slabs or with the new income tax slabs 2020. According to tax and investment experts, if someone is opting for a new income tax slab, the benefit of Section 80C benefits at investment levels will be lost but they will continue to get the tax benefit on interest earned and the maturity amount on the investment tools listed in Section 80C beneficiary list. They also said that the recruiters' deposit in the National Pension Scheme (NPS) under Section 80CCD(2) will continue. Apart from that, they can claim tax exemption on house rent paid, even after opting for the new income tax slabs 2020-21.
Speaking on the new income tax slabs 2020, Sunil Garg, a tax and investment expert said, "According to the Money Bill 2020, those who are living in a rented house, can still claim the standard deduction for their house rent. Apart from this, they can claim tax exemption under Section 80CCD(2) on the recruiters' deposit in the NPS scheme." Garg said that in a new income tax slab, salaried people need to asses their investments and then only opt for either of the two income tax slabs being offered to them.
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"One should use the income tax calculator available in the Income Tax Department's website and check, which one is better and then choose their option. A salaried person can choose either of the income tax slabs options in a financial year but a businessman cannot change the income tax slab once the choice has been made as he gets to carry forward his losses in the next financial year. But, this is not the case with a salaried individual and hence they can change their income tax slabs option next year as per their convenience and there is no such limit on them as far as changing of the income tax slab is concerned."
While presenting the Union budget 2020, Finance Minister Nirmala Sitharaman had said that an income tax payer earning from Rs 5 lakh to Rs 7.5 lakh will have to pay 10 per cent tax on income. FM announced a new income tax slabs of Zero to Rs 5 lakh, from Rs 5 lakh to Rs 7.5 lakh, from Rs 7.5 lakh to Rs 10 lakh, from Rs 10 lakh to Rs 12.5 lakh, from Rs 12.5 lakh to Rs 15 lakh and a slab for a taxpayer earning above Rs 15 lakh.
Here is the new income tax list of proposed rates to be imposed on an earning individual in budget 2020:
- Zero income tax on up to Rs 5 lakh income tax slab;
- An income taxpayer earning from Rs 5 lakh to 7.5 lakh to pay 10 per cent;
- An income taxpayer earning from Rs 7.5 lakh to Rs 10 lakh to pay 15 per cent;
- An income taxpayer earning from Rs 10 lakh to 12.5 lakh to pay 20 per cent only;
- An income taxpayer earning from Rs 12.5 lakh to Rs 15 lakh to pay 25 per cent income tax; and
- A taxpayer earning above Rs 15 lakh per annum will have to pay 30 per cent of one's income.
Elaborating upon the new income tax slabs, SEBI registered tax and investment expert Jitendra Solanki said, "This standard deduction is available for only those taxpayers who are living in a rented house. Those who are living in their own house and paying home loan EMI, should continue with the old income tax slabs as by opting for the new income tax slabs, they will have to lose Rs 2 lakh tax exemption on home loan interest payment."
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