The finance minister introduced some new schemes in the budget. The aim of the schemes was to increase the income of the citizens. However, the most important factor of the Union Budget 2020 was the new tax rate. People wanted to know if they get any tax relief in the budget.
A new income tax regime was introduced by the finance minister. The tax rate for almost every income group was reduced. The citizens who want to pay tax as per the new tax regime must forgo their exemptions. However, the finance minister has allowed the citizens to pick between the new tax regime and the old tax regime. People who want to claim exemptions can pay tax as per the old tax rates.
The Old Tax Regime and the New Tax Regime-
The new income tax slab is lower for almost every salaried person as per the new regime. However, they will have to forgo around 70 of more than 100 exemptions and deductions.
Here is the difference between the old and the new tax regime-
|Old Tax Rate
|New Tax Rate
|Up to Rs. 2.5 Lakhs
|Rs. 2.5 Lakhs to Rs. 5 Lakhs
|Rs. 5 Lakhs to Rs. 7.5 Lakhs
|Rs. 7.5 Lakhs to Rs. 10 Lakhs
|Rs. 10 Lakhs to Rs. 12.5 Lakhs
|Rs. 12.5 Lakhs to Rs. 15 Lakhs
|Above Rs. 15 Lakhs
However, people who want to file for exemptions and deductions can pay tax as per the old tax regime. If a taxpayer wants to pay tax as per the old tax regime, then there are different ways to save taxes.
Here are 3 different age groups classified-
If a person is young, then they can save a lot on insurance premiums. Insurance offers financial protection to the policyholders and their families. However, an important benefit of purchasing insurance is the tax benefit it offers. The money paid for investment plans can get a tax deduction of up to Rs. 1.5 Lakh as per the Section 80C. Health insurance premium can get the policyholder a tax deduction of up to Rs. 25,000 as per the Section 80D. Many young people have education loans. The interest paid on such loans can get tax benefits as per the Section 80E.
A married person has a lot more responsibilities. They must support their children, pay for home loans, save money for child’s education, etc. If a person has a home loan, life insurance, and health insurance, then they can file for tax deductions. However, they can also put their money in different investment instruments such as the National Pension Scheme. It offers a tax deduction for investment of up to Rs. 50,000.
People Around Retirement Age
Many people around retirement age have paid off their home loans and must have touched the term age of their policies. However, they can file for tax deductions with their health insurance policies and EPF scheme.
However, people who pick the new tax regime can pay tax at lower rates. While people can pay tax at a reduced rate, they will have to forgo their exemptions.
Some of the exemptions that people will have to forgo are-
- House Rent Allowance
- Leave Travel Allowance
- Standard Deduction
- Tax Deduction as per the Section 80TTA/80TTB
- Tax Deduction as per the Section 80D