IS OPTIONAL TAX SALB IS BENEFIT TO SALALRIED INDIVIDUAL....?

As the financial year end, every salaried  individual is thinking about their taxes and income calculation  for the financial year 2020-21 . From that financial year individual are also select income tax slab as new optional tax  slab introduced in finance act, 2020. 

Now , individual have option to go either with:

  1. Old income tax rate and avail all exemption and deduction as available earlier. or
  2. Select New lower concessional income tax rate and withdraw certain exemption and deduction.  (Insert with  as section 115BAC )
( THIS NEW OPTION IS AVAILABLE FOR INDIVIDUAL HAVING ALL 5 HEAD INCOME BUT HERE OUR DISCUSSION IS BASE ON SALARY AND OTHER SOURSE INCOME)





Income tax rate under both option are as follow

INCOME TAX SLAB (NET INCOME)

OLD TAX RATE

NEW TAX RATE

0-     UPTO  250,000

NIL

NIL

250,001- 500,000

5%

5%

500,001- 750,000

20%

10%

750,001- 1000,000

20%

15%

1000,001-1250,000

30%

20%

1250,001- 1500,000

30%

25%

Above 1500,000

30%

30%

NOTES

  • Under new scheme there is no relaxation in basic exemption limit for senior or super senior resident.
  • Under both option rebate u/s 87A is available for Rs 12,500 with income upper cap of Rs 500,000.
  • Surcharge and Cess is leviable as earlier.
  •  Individual or HUF  with no business income shall exercise option every  year. ( If business income , option once exercised is continue for subsequent year also)
  • A taxpayer who opt for new optional tax rate shall not entitled to avail following exemption and deduction
  1. Standard  deduction of Rs 50,000.
  2. Leave travel allowance, HRA, other special allowance
  3. Entertainment allowance and Professional tax 
  4. Deduction under 10(32) for minor income club
  5. Deduction under section 24 of home loan interest on self occupied and vacant house
  6. Deduction under chapter VIA (Sec 80C -80IBA) except Sec 80CCD(1) and Sec 80JJAA.

WHICH ONE IS BETTER

After understanding both the option we find both have their pro and cons.
 In laymen language we can say a taxpayer who want to invest and diverse its income should go for existing tax structure where he get deduction and exemption for its investment .

On the other hand a person who wants more cash in hand and meet existing requirement of their life and not able to invest for long term prospective. These option is suitable for fresher who at begging can not diverse their income for such deduction and exemption rather they need more cash in hand to survive more sufficiently. 

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