Important Keyword: Budget 2020, Dividend Income, Income from House Property, Resident Status, Slab Rates.
Table of Contents
Budget 2020: Highlights
The Finance Minister, Nirmala Sitharaman, delivered the Budget 2020 speech on February 1, 2020. Lasting a record-breaking 2 hours and 30 minutes, her address unveiled several significant announcements that shaped the economic landscape. Here are the major highlights of Budget 2020:
New Tax Regime v/s Current Tax Regime
Income Tax Slab Rates
Certainly, here are the income tax slab rates for both the current and new tax regimes as announced by the Finance Minister:
Current Tax Regime:
| Income Range (in INR) | Tax Rate |
|---|---|
| Up to 2,50,000 | Nil |
| 2,50,001 – 5,00,000 | 5% |
| 5,00,001 – 10,00,000 | 20% |
| Above 10,00,000 | 30% |
New Tax Regime:
| Income Range (in INR) | Tax Rate |
|---|---|
| Up to 2,50,000 | Nil |
| 2,50,001 – 5,00,000 | 5% |
| 5,00,001 – 7,50,000 | 10% |
| 7,50,001 – 10,00,000 | 15% |
| 10,00,001 – 12,50,000 | 20% |
| 12,50,001 – 15,00,000 | 25% |
| Above 15,00,000 | 30% |
Under the new tax regime, taxpayers have the option to forgo exemptions and deductions in exchange for lower tax rates. It provides a simplified tax structure with reduced rates and aims to promote ease of compliance for individual taxpayers. However, taxpayers are advised to evaluate their individual financial situations and consult with tax experts before opting for either tax regime to make an informed decision.
Changes in Deductions and Exemptions
Certainly, here’s a breakdown of the major removals of tax exemptions and deductions announced in Budget 2020, along with the deductions that have remained:
Changes under Income from House Property
Here are the changes in deductions related to home loan interest, as per the new income tax regime:
- No claim of home loan Interest on Self-Occupied House Property: Taxpayers who have taken a home loan for their self-occupied property and are paying interest on it cannot claim the interest deduction under Section 24(b).
- Claim of home loan Interest on Rental House Property: Under the new income tax regime, individuals can only claim interest on home loans for let-out properties up to the amount of their rental income.
- Setting off losses from house property: In the new income tax regime, losses from house property can only be set off against other income from house property. Furthermore, losses from income from house property cannot be carried forward.
- Deduction for First-time Homebuyers: Deductions under Section 80EE and Section 80EEA, which provided relief on interest paid on home loans for first-time homebuyers, are no longer available for taxpayers following the new income tax regime.
Other Important Highlights of the Budget 2020
Dividend Distribution Tax (DDT)
The landscape of dividend taxation underwent a significant shift with the abolition of Dividend Distribution Tax (DDT) for companies. Under the new regime, dividends are now directly taxable for shareholders at a rate of 15%.
Corporate Tax:
In the realm of corporate tax, notable changes have been introduced:
- Tax on Co-operative Societies: The tax rate for co-operative societies has been reduced from 25% to 22% without exemptions. This move aims to provide relief to co-operative societies and enhance their competitiveness in the market.
- Tax for Manufacturing Startups: Manufacturing startups registered after 1 October 2019 will benefit from a reduced tax rate of 15%. This incentive is contingent upon them commencing operations by 31 March 2023. The measure seeks to encourage the growth of manufacturing startups and promote industrial development.
Foreign Portfolio Investment (FPI)
In the domain of Foreign Portfolio Investment (FPI), specific adjustments have been made:
Expansion of Corporate Bond Limit: The limit for Foreign Portfolio Investment (FPI) in corporate bonds has been raised from 9% to 15%. This adjustment aims to attract greater foreign investment in corporate bonds, thereby bolstering liquidity in the market and facilitating capital inflows into the corporate sector.
Residential Status
In the Budget 2020, significant changes were made to the conditions governing residential status for tax purposes. The amendment reduced the threshold for the number of days an individual must spend in India during the previous financial year to qualify as a resident.
Previously, an individual was considered a resident for tax purposes if they were present in India for 182 days or more during the previous financial year. However, with the amendment introduced in Budget 2020, this threshold was reduced to 120 days.
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Official Income Tax Return filing website: https://incometaxindia.gov.in/
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