The Finance Minister introduced some new schemes to increase the income of every citizen. The new schemes are introduced in different sectors of the nation. However, one of the most important things that people wanted to know was the tax rate. They wanted to know if they get any tax relief in the Union Budget 2020.
A new income tax regime was proposed in the budget 2020. The tax rate went low for almost every income tax group.
The Tax Rate
The new tax regime reduces taxes for many salaried people. However, people will have to forgo their exemptions. If a person doesn’t want to forgo their exemptions, then they can pay tax as per the old tax regime.
The finance minister has allowed the citizens to pick between the old tax regime and the new tax regime.
Tax rates as per the new tax regime-
- People earning up to Rs. 2.5 Lakhs are exempted from tax
- People earning up to Rs. 5 Lakhs are taxed at 5%
- People earning between Rs. 5 Lakhs to Rs. 7.5 Lakhs must pay 10% tax
- People earning between Rs. 7.5 Lakhs to Rs. 10 Lakhs are taxed at 15%
- People earning between Rs. 10 Lakhs to Rs. 12.5 Lakhs must pay 20% tax
- People earning between Rs. 12.5 Lakhs to Rs. 15 Lakhs must pay 25% tax
- People earning above Rs. 15 Lakhs are taxed at 30%
There is a tax rebate for people earning up to Rs. 5 Lakhs of Rs. 12,500. However, cess and surcharge are levied at the same rates for old and new tax regime.
The new tax regime classifies 3 categories of taxpayers-
- Citizens below the age of 60 years. The tax exemption for them is up to Rs. 2.5 Lakhs
- Citizens between 60 and 80 years of age. The tax exemption for them is up to Rs. 3 Lakhs
- Citizens above 80 years of age. The tax exemption for them is up to Rs. 5 Lakhs
Here is a comparison of people earning above Rs. 10 Lakhs but are in different age groups-
Taxpayer below 60 years of age
| Income | Income Tax Rate | Cess | Income Taxable |
| Up to Rs. 2.5 Lakhs | Nil | Nil | Rs. 2.5 Lakhs |
| Rs. 2.5 Lakhs to Rs. 5 Lakhs | 5% (income minus Rs. 2.5 Lakhs) | 4% | Rs. 5 Lakhs |
| Rs. 5 Lakhs to Rs. 10 Lakhs | Rs. 12,500 + 20% (income minus Rs. 5 Lakhs) | 4% | Rs. 10 Lakhs |
| Above Rs. 10 Lakhs | Rs. 1,12,500 + 30% (income minus Rs. 10 Lakhs) | 4% | RS. 15 Lakhs |
Taxpayer between 60 to 80 years of age
| Income | Income Tax Rate | Cess | Income Taxable |
| Up to Rs. 3 Lakhs | Nil | Nil | Rs. 3 Lakhs |
| Rs. 3 Lakhs to Rs. 5 Lakhs | 5% (income minus Rs. 3 Lakhs) | 4% | Rs. 5 Lakhs |
| Rs. 5 Lakhs to Rs. 10 Lakhs | Rs. 10,000 + 20% (income minus Rs. 5 Lakhs) | 4% | Rs. 10 Lakhs |
| Above Rs. 10 Lakhs | Rs. 1,10,000 + 30% (income minus Rs. 10 Lakhs) | 4% | Rs. 15 Lakhs |
Taxpayer above 80 years of age
| Income | Income Tax Rate | Cess | Income Taxable |
| Up to Rs. 5 Lakhs | Nil | Nil | Rs. 5 Lakhs |
| Rs. 5 Lakhs to Rs. 10 Lakhs | 20% (income minus Rs. 5 Lakhs) | 4% | Rs. 10 Lakhs |
| Above Rs. 10 Lakhs | Rs. 1,00,000 + 30% (income minus Rs. 10 Lakhs) | 4% | Rs. 15 Lakhs |
A person can file for income tax return by-
- Collecting the documents such as TDS certificates
- Downloading the Form 26AS. The person must correct the wrongs in the form
- Computing total income
- Computing tax liability
- Downloading ITR form after paying all the taxes
- Verifying tax-return
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