Announced in the Budget 2020, FM Nirmala Sitharaman bought significant changes in the direct tax policies. Issued amendments in the Finance Bill 2020, an optional theme for taxpayers has been placed this time in the tax rules. According to the bill, the taxpayer in FY 2020 will be provided an option to either choose the existing tax slab rates and pay taxes as per past regime or take advantage of lowered tax slab rates by abiding some conditions.
The Budget also proposed to change the way of determination of residential status, where a taxpayer will be considered a resident as per Income tax rules “ only if he is not liable to pay tax in any other country “. New amendments and removal of deduction & exemptions had certainly made compliance filling for taxpayers simpler, but with addition to three more slabs, it might make the condition more problematic for some taxpayers to compute and pay taxes with the new regime.
What is the new Optional Theme for Income Tax?
For all those taxpayers who don’t want to leave their current applicable tax slab rates, the government has bought an optional theme for them to get taxed at their previous rates as applicable to them earlier. While for those who want to opt-out of the current regime, they can file their rates at subsidized rates by opting Section 115BAC and foregoing some available deductions and exemptions.
Out of more than 100 deductions and exemptions in the Income-tax Act, 1961, Section 115BAC takeaways 70 exemptions and deductions including deductions under Section 80C, education loan interest, standard deduction, leave travel allowance, house rent allowance, saving bank interest, etc.
