When a new tax regime was reported in Money Bill, 2020 people got inquisitive and began calling their specialists to ask what tax regime they ought to pick and what is the new tax regime and is it for everybody or not.
Essentially the new tax regime should apply for FY 2020-21, however, people couldn't hold it till next money related year and began posing inquiries and it was difficult to offer some response to each and everybody as this section needs one to concentrate each case independently and ascertain whether there is any tax sparing in moving to the tax regime or not.
Presently, Financial plan 2020 has been passed by Lok Sabha and gotten President consent and just one change was made to Section 115BAC when contrasted with unique section introduced at the hour of a Spending plan for example around then it was referenced that for people gaining income from business can pull back from this the section just once in a blue moon and the section didn't cover people procuring income from calling. In the last financial plan, they have even included people acquiring income from calling
Thus now the people occupied with a calling can also pull back this alternative once in a lifetime for example when they are picked in for this section and in later years on the off chance that they pull back section 115BAC for at all the explanation they can't select in again in this arrangement.
Concerning count part prior there were relatively few choices accessible, however as the time went there were numerous sites which were giving the technique to ascertain which regime is more advantageous. Also, the Income-tax e documenting the site was giving this usefulness, however, it was not thinking about extra charge and likewise, there were different blemishes in various sites like some would not consider capital increase income and so forth.
Along these lines we have attempted to also furnish you with an answer through our exceed expectations sheet, there may be some imperfections in this also as it's hard to cover each and every circumstance in one exceed expectations sheet. However, we have attempted to incorporate each and all that we could consider.
Do share your criticism in remarks beneath as there is in every case some degree to improve.
The CBDT ( Central Board of Direct Taxes) as of late gave a roundabout furnishing explanation regarding option under section 115BAC of the Income-tax Act, 1961
Section 115BAC: The recently embedded Section 115BAC of the Income-tax Act, 1961 gives that an individual, being an individual or from a unified family having income other than income from business or calling may pick to be taxed under the section alongside his the arrival of income to be outfitted under sub-section (I) of section 139 of the Act for every year.
Section 115BAC of the Income-tax Act, 1961 gives a concessional rate, however, it is dependent upon the condition that the all-out income will be figured without indicated exclusion or reasoning set off of misfortune and extra devaluation.
Be that as it may, there was an absence of lucidity with respect to whether the arrangements of section 115BAC of the Act are to be considered at the hour of deducting tax or not. A few concerns were gotten with respect to tax to be deducted at source (TDS), which brought up that the deductor, being a business, would not know whether the individual, being a representative, would settle on taxation under section 115BAC of the Act or not, as the option is required to be practised at the hour of recording of return.
Consequently, to the stay away from the disarray and difficulty in such cases, the Focal Leading body of Direct Taxes, in the activity of its forces under section 119 of the Act gave the accompanying explanations:
A representative, having income other than the income under the head "benefit and gains of business or calling" and aiming to select the concessional rate under section 115BAC of the Act, may suggest the deductor of such goal for each previous year.
• The deductor, being the business, will at that point register his all-out income and make TDS consequently as per the arrangements of section 115BAC of the Act.
• On the off the chance that the representative neglects to make such implication, the business will make TDS without thinking about the arrangement of section 115BAC of the Act.
Further, the the implication made to the deductor by the representative will just be for the reasons for TDS during the previous year and can't be adjusted during that year.
• In any case, the insinuation would not add up to practising the option as far as sub-section (5) of section 115BAC of the Act and the individual will be required to do as such alongside the arrival to be outfitted under sub-section (1) of section 139 of the Act for that previous year.
• Hence, option at the hour of documenting of return of income under sub-section (1) of section 139 of the Act could be not quite the same as the insinuation made by such worker to the business for that previous year.
If there should be an occurrence of an individual who has income under the head "benefit and gains of business or calling" additionally, the option for taxation under section 115BAC of the Act once practised for a previous year at the hour of documenting of return of income under sub-section (1) of section 139 of the Act can't be changed for resulting previous years aside from in specific conditions.
The above explanation by the Focal Leading body of Direct Taxes would apply to such individual with an adjustment that the hint to the business for his situation for resulting previous years must not go amiss from the option under section 115BAC of the Act once practised in a previous year.
How to do Income Tax Calculation for FY 2020-21? Which Tax Structure to Choose?
Here is the answer to these inquiries!
According to Budget 2020, you cannot claim any tax deduction or exception if you plan to opt for a new tax structure. Along these lines, as an individual taxpayer if you opt for the new tax regime with lessening tax rate you need to forgo all tax breaks available today. Fortunately, you have the option to proceed with the old tax structure. A salaried individual can switch among old and new tax structure.
Firstly, we will talk about which tax deduction and exception you need to forgo in case you opt for new tax structure with diminishing the tax rate. Secondly, we will take a few experiments and do income tax calculation for FY 2020-21 to realize which tax structure to choose?
Rundown of Tax Deductions and Exclusion not allowed in new Tax Structure
1 Tax Deduction Under Section 80C ( But If you Opt-in as Old Tax Regime you can get this benefit)
The most popular tax deduction of 1.5 Lakh under section 80C isn't applicable for new tax structure. This means you cannot claim any benefit for the speculation made in the instruments, for example, PF, PPF, Life insurance premium, school education costs of kids, ELSS, PPF, NPS and so on.
You can claim deduction under section 80CCD for the employer commitment on account of an employee for NPS.
2 Tax Deduction Under Section 80D ( But If you Opt-in as Old Tax Regime you can get this benefit)
No tax deduction is allowed for the medical insurance premium and preventive health test under section 80D for new tax structure.
3 No LTA Benefits But if you Opt-in as Old Tax Regime you can get this benefits
For new tax structure LTA – Leave travel allowance exclusion which is currently available to a salaried employee for twice in a square of four years isn't allowed.
4 HRA Exemption U/s 10(13A) ( But If you Opt-in as Old Tax Regime you can get this benefit)
HRA is house lease allowance. HRA is paid to salaried individuals by an employer as a part of a salary. The earlier taxpayer was able to claim HRA up to a certain cutoff. In a new tax structure, it isn't admissible.
5 Standard Deduction ( But If you Opt-in as Old Tax Regime you can get this benefit)
A standard deduction benefit of Rs.50000 currently available to the salaried taxpayer isn't applicable in new tax slab.
6 Section 80TTA Benefits ( But If you Opt-in as Old Tax Regime you can get this benefit)
Section 80TTA gives a deduction of Rs.10000 on intrigue income. On a new tax regime, this benefit isn't available. ( But If you Opt-in as Old Tax Regime you can get this benefit)
7 Section 80DDB Benefits ( But If you Opt-in as Old Tax Regime you can get this benefit)
Benefits for disability under section 80DDB up to Rs.40000 not available in case you are planning to opt for new diminished tax structure.
8 Section 80E Education Loan ( But If you Opt-in as Old Tax Regime you can get this benefit)
Tax break reasonable on the intrigue paid on education loan won't be, claimable under section 80E.
9 Section 80G of Donation ( But If you Opt-in as Old Tax Regime you can get this benefit)
You had the option to make a donation under section 80G and claim income tax benefit of equivalent amount. The said deduction isn't available in the diminished tax structure.
10 Section 24 Home Loan Intrigue ( But If you Opt-in as Old Tax Regime you can get this benefit)
Under section 24 of the Income-tax Act, an individual was able to claim a tax deduction on the intrigue payment on the lodging loan up to a maximum amount of Rs.200000. This benefit isn't expanded if you opt for a new tax structure.
To put it Old Tax Regime, all deduction applicable under chapter VIA like section 80C, 80CCC, 80CCD, 80D, 80DD, 80DDB, 80E, 80EE, 80EEA, 80EEB, 80G, 80GG, 80GGA, 80GGC, 80IA, 80-IAB, 80-IAC, 80-IB, 80-IBA, and so on) won't be claimable by those opting for the new tax regime.
Presently how about we calculate actual tax the benefits by doing Income Tax Calculation and comparing both the tax structures in various cases.
Case 1 – Salaried Individual claiming regular deduction (80C,80D) and Home Loan Benefits
In the first case, I will take an example of a salaried individual with an income of 20 Lakh and 10 Lakh. How about we consider in both the cases individual takes benefits of standard the deduction Rs.50000, deduction of Rs.1.5 Lakh under section 80C, Rs.25000 under section 80D and Enthusiasm on a home loan up to Rs.200000.
Presently two options are available to the salaried individual. First, he/she can opt for old tax structure with all above deduction or he/she can forgo all deduction and opt for new diminished tax structure.
If an individual has an annual income of 20 Lakh and old tax structure has opted with tax deductions. Applicable tax is 2.85 Lakh. If a new tax structure is adopted applicable tax amount is 3.37 Lakh. Similarly, if annual income is 10 Lakh and old tax structure is adopted applicable tax is Rs.27500. For a new tax structure, the applicable tax is Rs.75000. The calculation is given beneath.
Gross Income Rs/-
Tax as per Old Tax Structure Rs/-
Tax as per New Tax Structure Rs/-
Additional Tax Saving Rs/- / Payable
7.5 Lakh
18200
39000
-20800
10 Lakh
70200
78000
-7800
12.5 Lakh
124800
130000
-5200
15 Lakh
202800
195000
7800
20 Lakh
358800
351000
7800
Case 2 – Salaried Individual claiming basic deduction under section 80C, 80D and Standard Deduction
In the subsequent case how about we assume that salaried individual is taking full benefits of section 80C, 80D and standard deductions as of now. Under a new tax regime, these deductions are not applicable. Assume the income level of an individual is 10 Lakh. If the old tax regime is chosen payable tax is Rs.70200 then again if the new tax regime is chosen payable tax is Rs.78000.
Gross Income Rs/-
Tax as per Old Tax Structure Rs/-
Tax as per New Tax Structure Rs/-
Additional Tax Saving Rs/-
7.5 Lakh
54600
39000
15600
10 Lakh
106600
78000
28600
12.5 Lakh
179400
130000
49400
15 Lakh
257400
195000
62400
20 Lakh
413400
351000
62400
Conclusion
From the above cases example, clearly in the vast majority of the cases, old the tax rate with deduction offers higher tax benefits. The new diminished tax rate is beneficial only if you are not claiming any deductions as of now. (which is very rare)
If you have a home loan and higher income you will get higher tax benefits in the old tax rate compared to a new tax rate.
First, look at the above V.D.O. how to calculate this Excel Utility step by step
Feature of this Excel Utility:-
1)This Excel Utility most handy and easy to generate just like an Excel File.
2)This Excel Utility have all the particulars about Government and Non-Government Concern’s Salary Pattern
3)This Excel Utility can prepare at a time your Income Tax Computed Sheet + Automated Income Tax Arrears Relief Calculation U/s 89(1) with Form 10E From the F.Y.2000-01 to F.Y.2020-21 (Update version)
4)This Excel Utility can calculate automatically your House Rent Exemption Calculation U/s 10(13A) ( If you Opt-in as Old Tax Regime)
5)This Excel Utility Prepare Automated Form 16 Pat A&B ( Who are not able to download the Form 16 Part A from the TRACES PORTAL)
6)This Excel Utility Prepare Automated Income Tax Revised Form 16 Part B for F.Y.2020-21
7)The utility has the Individual Salary Structure and Individual Salary Statement
8)After filling the First page of this Excel Utility all calculations and all of the Income Tax Forms will be completed.
9)This Excel Utility can use both of Old Tax Regime and New Tax Regime U/s 115 BAC as per Budget 2020
How to do Income Tax Calculation for FY 2020-21? Which Tax Structure to Select?
As per budget 2020, you cannot claim any tax deduction or exemption if you plan to opt new tax structure. So, as an individual taxpayer if you opt for the new tax regime with reducing tax rate you need to forgo all tax breaks available today. Fortunately, you have the option to continue with the old tax structure. A salaried person can switch between old and new tax structure.
Firstly, we will talk about which tax deduction and exemption you need to forgo in case you opt for new tax structure with reducing the tax rate. Secondly, we will take a few test cases and do the income tax calculation for FY 2020-21 to know which tax structure to select?
List of Tax Deductions and Exemption not allowed in new Tax Structure
1 Tax Deduction Under Section 80C
The most popular tax deduction of 1.5 Lakh under section 80C is not applicable for new tax structure. This means you cannot claim any benefit for the investment made in the instruments such as PF, PPF, Life insurance premium, school tuition fees of children, ELSS, PPF, NPS etc.
You can claim deduction under section 80CCD for the employer contribution on account of an employee for NPS.
No tax deduction is allowed for the medical insurance premium and preventive health checkup under section 80D for new tax structure.
3 No LTA Benefits
For new tax structure LTA – Leave travel allowance exemption which is currently available to salary an employee for twice in a block of four years is not allowed.
4 HRA
HRA is house rent allowance. HRA is paid to salaried individuals by an employer as a part of a salary. The earlier taxpayer was able to claim HRA up to a certain limit. In a new tax structure, it is not permissible.
5 Standard Deduction
A standard deduction benefit of Rs.50000 currently available to the salaried taxpayer is not applicable in new tax slab.
6 Section 80TTA Benefits
Section 80TTA provides a deduction of Rs.10000 on interest income. On the new tax regime, this benefit is not available.
7 Section 80DDB Benefits
Benefits for disability under section 80DDB up to Rs.40000 not available in case you are planning to opt for new reduced tax structure.
8 Section 80E Education Loan
Tax break permissible on the interest paid on education loan will not be claimable under section 80E.
9 Section 80G of Donation
You were able to make a donation under section 80G and claim income tax benefit of equivalent amount. The said deduction is not available in the reduced tax structure.
10 Section 24 Home Loan Interest
Under section 24 of the Income-tax Act, an individual was able to claim a tax deduction on the interest payment on the housing loan up to a maximum amount of Rs.200000. This benefit is not extended if you opt for a new tax structure.
Other deduction applicable under chapter VIA like section 80C, 80CCC, 80CCD, 80D, 80DD, 80DDB, 80E, 80EE, 80EEA, 80EEB, 80G, 80GG, 80GGA, 80GGC, 80IA, 80-IAB, 80-IAC, 80-IB, 80-IBA, etc) These Tax Section are not entitled to the New Tax Regime – Only allow to get relief who are Opt-in Old Tax Regime.
Income Tax Calculation FY 2020-21 (AY 2021-2022)
Now let’s calculate actual tax benefits by doing Income Tax Calculation and comparing both the tax structures in various cases.
Case 1 – Salaried Individual claiming common deduction (80C,80D) and Home Loan Benefits
In the first case I will take the example of a salaried individual with an income of 20 Lakh & 10 Lakh. Let’s consider in both the cases individual takes benefits of standard deduction Rs.50000, deduction of Rs.1.5 Lakh under section 80C, Rs.25000 under section 80D and Interest on a home loan up to Rs.200000.
Now two options are available to the salaried individual. First, he/she can opt for old tax structure with all above deduction or he/she can forgo all deduction and opt for new reduced tax structure.
If an individual has an annual income of 20 Lakh and old tax structure has opted with tax deductions. Applicable tax is 2.85 Lakh. If a new tax structure is adopted applicable tax amount is 3.37 Lakh. Similarly, if annual income is 10 Lakh and old tax structure is adopted applicable tax is Rs.27500. For the new tax structure, the applicable tax is Rs.75000. The calculation is given below.
Example Picture of Calculation of Tax 1 and 2
Case 2 – Salaried Individual claiming common deduction under section 80C, 80D and Standard Deduction
In the second case let’s assume that salaried individual is taking full benefits of section 80C, 80D and standard deductions as of now. Under the new tax regime, these deductions are not applicable. Suppose the income level of an individual is 10 Lakh. If the old tax regime is selected payable tax is Rs.70200 on the other hand if the new tax regime is selected payable tax is Rs.78000.
Gross Income Rs/-
Tax as per Old Tax Structure Rs/-
Tax as per New Tax Structure Rs/-
Additional Tax Saving Rs/- / Payable
7.5 Lakh
18200
39000
-20800
10 Lakh
70200
78000
-7800
12.5 Lakh
124800
130000
-5200
15 Lakh
202800
195000
7800
20 Lakh
358800
351000
7800
Case 3 – Salaried Individual not claiming any deduction or exemptions
In the third case let’s assume that salaried individual is not claiming any deduction of exemptions as of now. So, under the new tax regime, he/she will get the benefit of reduced tax rates and he/she needs to pay fewer taxes. Suppose the income level of an individual is 15 Lakh. If the old tax regime is selected payable tax is Rs.257400 on the other hand if the new tax regime is selected payable tax is Rs.195000 only.
Gross Income Rs/-
Tax as per Old Tax Structure Rs/-
Tax as per New Tax Structure Rs/-
Additional Tax Saving Rs/-
7.5 Lakh
54600
39000
15600
10 Lakh
106600
78000
28600
12.5 Lakh
179400
130000
49400
15 Lakh
257400
195000
62400
20 Lakh
413400
351000
62400
Conclusion:- From the abovecasesexampleitisobviousthatinmostofthecasesoldtaxratewithdeductionoffershighertaxbenefits. Newreducedthe taxrateishelpfulonlyifyouarenotclaiminganydeductionsasofnow. (whichisveryrare) If youhave a homeloanandhigherincomeyouwillgethighertaxbenefitsinoldtaxratecomparedtonewtaxrate.
1)You can choose your option as Old or New Tax Regime as per Budget 2020
2)This Excel Utility Prepare at a time your Income Tax Computed Sheet + Automated H.R.A. Calculation U/s 10(13A) + Automated Income Tax Form 16 Part A&B in Revised Format + Automated Revised Form 16 Part B + Automated Income Tax Form 12 BA for the F.Y. 2020-21.
3)Automatic Convert the Amount into the In-Words without any Excel Formula
4)All the Income Tax Section have in this Utility as per the Budget 2020
5)The Salary Structure have in this utility as per all of the Private Concern’s Salary Pattern.
