What The Budget Means For You
The Hindu Business Line|February 03, 2020
For taxpayers: A dampener mostly; some relief too
Anand Kalyanaraman Parvatha Vardhini C Keerthi Sanagasetti
What The Budget Means For You

For individual taxpayers, the Budget has been underwhelming, especially given the high expectations that preceded it.

In an attempt to address the demands of taxpayers to lower tax rates, the Finance Minister has given them a choice to move to a new tax regime. But this has only complicated matters, and the end-result may not be worth it for many taxpayers.

So, we now have the option of continuing with the existing tax regime (with existing income slabs, tax rates and benefits of deductions and exemptions) or moving to the new tax regime (with new income slabs, lower tax rates, but without the benefit of most deductions and exemptions).

Should you opt for the new tax regime? The short answer is — it depends. Number-crunching and cost-benefit analysis will be needed to decide whether to stay in the old regime, or shift to the new one.

Under the old regime, there were four income slabs and basic tax rates. This will now become seven (see table).

On the face of it, the rejig of income slabs and lower taxes in the new regime should ideally translate to lower taxes. But there is a catch that spoils the match. To be eligible for the new regime that has lower tax rates, you will have to forgo the benefits of most tax breaks.

These include deductions such as Section 80C (annual investment, expenses, life insurance premium of up to ₹1.5 lakh), Section 80D (health insurance premiums), Section 24 (home loan interest of up to ₹2 lakh), Section 80CCD (including extra NPS (National Pension Scheme) contribution of up to ₹50,000 a year), Section 80E (education loan interest), Section 16 (standard deduction on salary income).

Also, you will have to forgo the benefits of most exemptions under Section 10 such as house rent allowance and leave travel concession.

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