What Budget 2020 Has For You

The decision to switch to the new income tax rates will depend on the level of deductions that you are able to use in the present regime.

- Naveen Kumar

Given the state of the economy, where consumption levels are declining, it was widely anticipated that the government would come up with some path-breaking initiatives that would leave more disposable income in hands of taxpayers and drive up consumption. However, Budget 2020 has not brought any substantial tax benefit to individual taxpayers, though there are many proposals that can benefit them. Here is a look at the most important proposals that will have an effect on your personal finance.

Option of reduced tax rate, but with trade-off – The Budget has introduced new reduced tax rates for incomes between ₹5 lakh and ₹15 lakh for those who do not use exemptions or deductions (see Quick Glance). “With the removal of several allowances such as LTA, HRA, perquisites, transport allowances, the income tax regime is no longer ‘simplified’ and taxpayers will have to choose between the two regimes and check which one is more beneficial,” says Archit Gupta, Founder and CEO, Cleartax. “The optional instance will complicate it for taxpayers.

Income tax slab unchanged – If your gross income is above Ì€ 5 lakh and you have been using various exemptions and deductions like standard deduction, house rent allowance (HRA), leave travel allowance (LTA), home loan interest and principal, Section 80C investments and expenses, health insurance premium, National Pension System (NPS), and so on, to bring down your net taxable income substantially, the Budget may not have any new relief for you. New reduced tax rates have been announced but are applicable only if you forego all the deductions and exemptions.