Budget 2020 has introduced a new optional rate of taxation for Individual & HUF. Presently, individuals/ HUF are liable to pay tax @ 5% on income between Rs. 2.50 Lakh to Rs. 5 Lakh, 20% for income slab from Rs 5 Lakh to Rs. 10 Lakh & 30% for income slab from Rs 10 Lakh. The new tax slabs proposed are as under:

Total Income	Rate
Up to Rs 2,50,000	Nil
From Rs 2,50,001 to Rs 5,00,000	5%
From Rs 5,00,001 to Rs 7,50,000	10%
From Rs 7,50,001 to Rs 10,00,000	15%
From Rs 10,00,001 to Rs 12,50,000	20%
From Rs 12,50,001 to Rs 15,00,000	25%
Above Rs 15,00,000	30%

However, above new concessional tax rates are subject to the conditions that the following deductions / exemptions are not availed by the taxpayers:

1. Leave travel concession (LTC) U/s 10(5) which is currently available to salaried employees twice in a block of four years
2. House rent allowance (HRA) U/s 10(13A)
3. Some of the allowances u/s 10(14)
4. Deduction in respect of Minor’s Income U/s 10(32)
5. Standard deduction, Deduction for entertainment allowance and professional tax u/s 16
6. Deduction towards Interest on house property U/s 24 in respect of self-occupied or vacancy allowance U/s 23(2)
7. Loss under the head income from house property for rented house shall not be allowed to be set off under any other head and would be allowed to be carried forward as per extant law)
8. Additional deprecation U/s 32(1)(iia)
9. Deductions U/s 32AD towards investment in new plant & machineries, 33AB towards tea development account, 33ABA towards site restoration fund, 35AD, 35CCC or 35(2AA)(1) (iia) or (iii);
10. Deduction up to Rs. 15,000/- from family pension U/s of section 57(iia);
11. Any deduction under chapter VI A (like section 80C towards LIC/PPF/ELSS/Tuition fees etc, 80CCC, 80CCD, 80D towards Mediclaim, 80DD towards medical treatment/maintenance of a dependant with disability, 80DDB towards specified medical treatment, 80E towards education loan interest, 80EE towards interest on housing loan availed in specified period, 80EEA, 80EEB, 80G towards donation, 80GG towards rent payment, 80GGA towards donation for scientific research or rural development, 80GGC towards donation to political parties, 80IA, 80-IAB, 80-IAC, 80-IB, 80-IBA, etc). However, deduction U/s 80CCD (2) i.e., employer contribution on account of the employee in notified pension scheme and U/s 80JJAA (for new employment) can be claimed.
12. Any exemption or deduction for allowances or perquisite, by whatever name called, provided under any other law for the time being in force.
13. Also, the lower tax rate will be allowed without set off of any loss,-
    (i) carried forward or depreciation from any earlier assessment year, if such loss or depreciation is attributable to any of the deductions referred to above; or
    (ii) under the head house property with any other head of income

However, the following allowances will be allowable even in the new concessional tax regime:

(a) Transport Allowance granted to a divyang employee to meet the expenditure for the purpose of commuting between place of residence and place of duty

(b) Conveyance Allowance granted to meet the expenditure on conveyance in performance of duties of an office;

(c) Any Allowance granted to meet the cost of travel on tour or on transfer;

(d) Daily Allowance to meet the ordinary daily charges incurred by an employee on account of absence from his normal place of duty.

Taxpayers having business income have a choice to opt for new tax regime only once and can be changed thereafter only on one subsequent occasions.  As against this, other taxpayers (i.e., Taxpayers not having business income) shall have flexible, open & free yearly choice either to opt or not to opt for new taxation regime.

In short, the comparison of tax rate under old regime vis a vis new regime shall be as under:

Income from			Old Rate	New Rate
0	to	Rs. 250000	0%	0%
Rs. 250000	to	Rs. 500000	5%	5%
Rs. 500000	to	Rs. 750000	10%	20%
Rs. 750000	to	Rs. 1000000	15%	20%
Rs. 1000000	to	Rs. 1250000	20%	20%
Rs. 1250000	to	Rs. 1500000	25%	20%
Rs. 1500000	Onwards		30%	30%

The tax saving under the old regime vis a vis new regime without considering the effect of allowance/deduction shall be as under:

Income	Tax* Under	Tax* Under	Tax Saving
of Rs.	Old Regime	New Regime
250000	0	0	0
500000	12500**	12500**	0
750000	62500	37500	25000
1000000	112500	75000	37500
1250000	187500	125000	62500
1500000	262500	187500	75000
2000000	412500	337500	75000

[* Without Cess, ** Without rebate U/s 87A)

Whether taxpayers should opt for the new tax regime or old tax regime:

Answer would obviously depend upon the extent of availability of deduction which is barred under the new tax regime. Taxpayer would be required to calculate the tax under the old regime with allowance, deduction and exemption with the tax under the new regime without such deduction/exemptions. The answer would vary from case to case basis. In most of the cases, person with optimum saving / investment / deductions would be benefitted by the old tax regime. New tax regime would benefit those taxpayers who don’t have enough investments/ deductions.

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