Union Finance Minister Nirmala Sitharaman, in her Budget 2020 speech, announced a new optional tax regime for taxpayers of the country. It was announced in Budget 2020 that in the new tax regime, those earning between Rs. 5 lakh to Rs. 7.5 lakh will pay income tax at the rate of 10%. Those earning between Rs. 7.50 and 10 lakhs will pay a 15% income tax. Those between Rs. 10 lakh and 12.50 lakh will pay a 20% income tax and the same for people earning between Rs. 12.50 and 15 lakh will be 25%. For those earning above Rs. 15 lakh in a year will be taxed at 30%.
The optional new tax regime announced in Budget 2020 also mandates that taxpayers will have to forego exemptions in order to benefit from the said declaration. These exemptions are concessions that taxpayers receive under the various sections of the tax code.
The list of exemptions includes “Leave travel concession as contained in clause (5) of section 10”, house rent allowance, allowances to MPs/MLAs in clause (17) of section 10, allowance for the income of minor in clause (32) of section 10. Others include standard deduction, the deduction for entertainment allowance and employment/professional tax in section 16 and deductions under section 32AD, 33AB and 33ABA. Deduction under section 35AD and section 35CCC are included in the list as well.
Exemptions such as certain deductions for donation for or expenditure on scientific research and deduction from family pension under clause (iia) of section 57 and additional deprecation under the same clause are also included in the list. Exemption for SEZ unit contained in section 10AA will have to be foregone to avail of the benefits of the new tax regime as well. Any deduction under chapter VIA and section 80JJAA that can be claimed will also have to be relinquished. In total, there are fourteen such exemptions that a taxpayer seeking to avail the benefits of the new optional tax regime will have to be given up.
