New Delhi: The new personal tax regime proposed in the Union Budget 2020 will benefit pensioners more than old regime.
Under the new tax proposal, people with an annual income of up to Rs 5 lakh will not have to pay any tax. For income between Rs 5 lakh to Rs 7.5 lakh, the tax rate is 10 per cent.
Further, those with an income of Rs 7.5 lakh to Rs 10 lakh will have to pay at 15 per cent; between Rs 10 lakh and 12.5 lakh at 20 per cent; between Rs 12.5 lakh and 15 lakh at 25 per cent; and above Rs 15 lakh at 30 per cent.
As per the Budget document, an individual taxpayer opting for the new tax regime will not be entitled for deduction under 80C of the Income Tax.
Section 80C provides deduction for contribution towards insurance premium, deferred annuity, provident fund and certain type of shares.
Taxpayer will also have to forego deduction under 80CCC (contribution towards certain pension fund), Section 80D (health insurance), 80E (interest on loan for higher education), 80EE (interest on loan taken for residential property), 80EEB (purchase of electric vehicle), 80G (donation to charitable institutions), and 80G (rent paid).
It’s very rare to find pensioners who claim deduction under Section 80.
“We have informally done some quick calculations and found that people across section particularly those who have just joined a job, somebody who is a pensioner or a very senior citizen, somebody who is not a salary earner but a small MSME, will benefit,” said Ajay Bhushan Pandey, Revenue Secretary in an interview to a TV Channel.
“In the personal income tax also there are only very few people who would be taking a very large number of deductions,” he said.
“There were also some people that because of their own financial constraints or financial conditions, they did not have that surplus that they would invest in those products which will give them exemptions, so they were actually at a disadvantage,” Pandey added.
Finance Minister Nirmala Sitharaman today presented to Parliament the budget for fiscal year 2020-21, which starts April 1, 2020.