NEW DELHI: a taxpayer who opts for new income tax The slabs and fees will have to give up a series of exemptions and deductions, including a standard deduction of Rs 50,000, the enrollment of children and the contribution to the insurance premium and the pension fund.
However, the new income tax system proposed by finance minister in the Union Budget 2020-21 is optional and a tax payer can choose to remain in the existing regime with exemptions and deductions.
Under the new tax proposal, people with an annual income of up to Rs 2.5 lakh will not have to pay any tax .
For income between Rs 2.5 lakh to 5 lakh, the tax rate (as earlier) is 5 per cent.
Live plus Further, those with an income of Rs 5 lakh to Rs 7.5 lakh will have to pay a reduced tax rate of 10 per cent; between Rs 7.5 lakh and Rs 10 lakh at 15 per cent; between Rs 10 lakh and 12.5 lakh at 20 per cent; between Rs 12.5 lakh and 15 lakh at 25 per cent; and above Rs 15 lakh at 30 per cent.
As per the Budget document, an individual tax payer opting for the new tax regime will not be entitled for deduction under 80C of the Income Tax.
Section 80C provides a deduction for contribution to the insurance premium, deferred annuity, pension fund and certain types of shares.
The taxpayer will also have to waive the deduction under 80CCC (contribution to certain pension funds), Section 80D (health insurance), 80E (interest on loan for higher education), 80EE (interest on loan taken for residential property), 80EEB (purchase of electric vehicle), 80G (donation to charities) and 80G (paid rent).
Besides, a tax payer opting for the new scheme will not get tax benefit for leave travel concession (LTC), allowances for income of minors, and certain allowances of MPs/MLAs.
The tax benefit will not be available in respect to free food and beverages through vouchers provided to employees.
However, it is proposed to retain certain deductions in the new regime, such as the transportation allowance to cover expenses in compliance with the duty and the allowance to travel on the tour and transfers.