Financial Year 2020-21 started on Wednesday amid a nation-wide lockdown.
In the view of the Coronavirus outbreak, the Government has already extended the deadline for filing Income Tax Returns for FY 2018-19 till June 30. Several other changes are also kicking in with the new financial year.
New Income-Tax Regime: The new income-tax slabs take effect today. Tax-payers, however, have a choice to opt either the old slabs or the new ones.
New tax rates:
Zero tax for incomes up to Rs 2.5 lakh
5% for incomes between Rs 2.5 lakh and up to Rs 5 lakh
10% for incomes between Rs 5 lakh and up to Rs 7.5 lakh
15% for incomes between Rs 7.5 lakh and up to Rs 10 lakh
20% for incomes between Rs 10 lakh and up to Rs 12.5 lakh
25% for incomes between Rs 12.5 lakh and up to Rs 15 lakh
30% for incomes above Rs 15 lakh
Under the new tax rates, taxpayers will not be able to avail benefits of deductions like standard deduction, deductions under Section 80C, exemptions on HRS, LTA, interest paid on home loans etc.
The new tax rates make tax filing easier and provide more disposable income for the tax-payer, besides benefiting young tax-payers.
Dividends Become Taxable: Dividends from mutual funds and domestic companies are also now taxable in the hands of the receiver. Income from these will be added to the total taxable income and taxed under the applicable slab. Also, if income from dividends exceeds Rs 5000 in a financial year, tax deduction at source at 10% will also be applicable.
Employer’s Contribution to EPF, NPS Taxable: If employer’s contribution to Employees’ Provident Fund (EPF), National Pension System (NPS) and superannuation fund exceeds Rs 7.5 lakh in a financial year, the excess will become taxable for the employee.
Deadline to Avail Home Loan Deduction Extended:
For first-time home-buyers, the government has extended the deadline to avail tax benefit under section 80EEA of the Income-tax Act, 1961 to March 31, 2021. This applies if the value of the house is up to Rs 45 lakh, as announced in Budget 2020. Those with home loans to buy houses up to Rs 45 lakh can claim additional tax deduction of Rs 1.5 lakh on interest in addition to the existing deduction of Rs 2 lakh.
Tax Relief to StartUps: The Budget allowed deferment of TDS on shares allotted to Startups under ESOPs or employee stock ownership plan. Under the new policy, tax payments are deferred to 48 months after exercise, cessation of employment or sale of shares, whichever is earliest.