We all remember the last time a nationwide change emptied our pockets – The Overnight Demonetization. While many struggled to return their cash notes to the banks, those who blended with the digitization of their money found accurate insights on how much money they had in their names. This step also inspired people to invest in various funds and schemes, which in turn helped them save tax better.
However, 5 years have passed since the Demonetization happened. Over the years, other better events took over, one of which was under section 80A which brought relief to the majority of the employed population by extending rebates till income of INR 5 Lakh/Year. Now, the Union Budget of 2020-21 will bring the next significant reform that may fill all our taxed employees’ pocket with more bling.
Here's what you will learn
The Union Budget 2020-21
Finance Minister, Nirmala Sitharaman proposed the Union Budget for FY 2020-21 which brings a lot of income tax reforms with a few catches along.
A progressive theme
The basic aim behind this theme is reducing unemployment in India for collective economic growth.
Impact of Union Budget 2020-21 on salaried employees
A simplified tax regime
The new budget introduced a classical system for income tax calculation that will hold beneficial for those who do not utilize various deductions for their tax savings. This reform will remove the dividend distribution of tax enhancing simplification. Those who switch to the new tax regime will have to exclude the formerly entertained deductions including:
- Exemption under section 80C – Up to INR 1.5 Lakh
- Exemption under section 80D – Up to INR 25,000 (For senior citizens INR 50,000)
- Tax rebate under section 87A – Up to INR 12,500 on the income of INR 5 Lakh or below
- Deduction on interest for home loans – Up to INR 2 Lakh
- Additional affordable home loan interest deduction under section 80EEA – Up to INR 1.5 Lakh
- Auto Loan interest deduction for the purchase of electric vehicles under section 80EEB – Up to INR 1.5 Lakh
Enjoy the power to choose
Along with changes in the income tax slabs for the salaried population of India, the next budget will also bring the freedom to switch to the new taxation system or sustain the previous one. The freedom of choice will allow the new generation to begin its tax payable journey based on personal preference while allowing those who already invested in various deduction systems to continue using the previous process.
Income tax slabs for FY 2020-21
Below INR 5 Lakh/Annum – No tax is levied. This class includes the majority of the salaried population that will surely get a sigh of relief from paying taxes.
INR 5-7.5 Lakh/Annum – As opposed to 20% in the last year, people falling in this slab will be taxed at 10% only.
INR 7.5-10 Lakh/Annum – As opposed to 20% in the last year, people falling in this slab will be taxed at 15% only.
INR 10-12.5 Lakh/Annum – As opposed to 30% in the last year, people falling in this slab will be taxed at 20% only.
INR 12.5-15 Lakh/Annum – As opposed to 30% in the last year, people falling in this slab will be taxed at 25% only.
Above INR 15 Lakh/Annum – As opposed to 30% in the last year, people falling in this slab will be taxed at 30% only. Say what? Unfortunately, people who earn this much are not the most beloved children for the government and will have to entertain the same tax rates.
Will Union Budget 2020-21 bring more jobs?
The Union Budget of FY 2020-21 also brings good news for those who are looking to start their career or are seeking better job opportunities. The Indian government is targeting to generate almost 2.62 Lakh new jobs in both government and private sector by March 2021.
- In the defence ministry – 22,046
- In the home ministry – 8,200
- In the culture ministry – 3,886
- In the department of space – 3,903
- In the department of revenue – 3,243
- In the ministry of earth sciences – 2,581
- In the ministry of external affairs – 2,167
- In the ministry of environment, forests and climate change – 2,136
- In the ministry of electronics and Information Technology – 1,347
- In the atomic energy department – 2,300
- In the department of agriculture, cooperation and farmers welfare – 1,766
- In the ministry of information and broadcasting – 1,600
- In the personnel ministry – 2,684
The target of increasing the GDP of the country will include better business opportunities for the private sector as well. The corporate taxation reforms will bring more relief to organizations leaving more money for priority spending. All these interim changes aim to increase inclusive productivity and growth while keeping mental health as a priority, whether it be for organizations or individual taxpayers.
Both in terms of bringing and saving more money, the Union Budget shows significant signs of positivity. Let’s hope this gets implemented with full force and brings happy hours for all us hardworking taxpayers in the coming time.