Dear Mihir, what are the key benefits for the salaried employees given that there will be no income tax on employees earning up to Rs 7 lakh? Regards

Ans: As per Budget 2020, if an assessee opts for the new tax regime, one will have to forego around 7o deductions & exemptions. This includes major deductions like Sec.80C, standard deduction of Rs.50K, HRA, etc.

You can still claim following exemptions under the New tax Regime:

1. Conveyance allowance received to meet the conveyance expenditure incurred as part of the employment.
2. Any compensation received to meet the cost of travel on tour or transfer.
3. Daily allowance received to meet the ordinary regular charges or expenditure you incur on account of absence from his regular place of duty.
4. Transport allowances in case of a specially-abled person.

Ans: Hi Prasanna
While the increase in limit from Rs. 5 Lakhs to Rs. 7 Lakhs is merely to accomodate the lower income segment and does not really make a difference to the highest tax bracket individuals. In this context, earlier, individuals whose income did not exceed Rs. 5 Lakhs had to pay Nil tax whether or not they opted for the new regime. The budget proposals has enhanced this limit to Rs. 7 Lakhs for individuals who opt for new tax regime but the earlier limit of Rs. 5 Lakhs would remain for individuals who opt for the old regime.

The slab rates for new tax regime have been tweaked to provide a small reduction in the tax liability as compared to the previous year.

Also, standard deduction benefit that was not available to an individual opting for new tax regime has now been allowed.

All in all, opting for new tax regime may now be beneficial.

Ans: Hi
The only deductions allowed for a salaried individual are the standard deduction of Rs. 50,000, NPS contribution by employer under section 80CCD(2), Family pension. Other than that no other deductions are available

Ans: New tax regime is beneficial if all the tax benefits are not taken. For e.g. if income is 30 lacs and deductions u/s 80C is 150000 taken, tax liability will be Rs.600000 under new tax regime and under old it will be 667500.

However, if person take PPF benefit of 1.5 lac, 25k in mediclaim, housing loan interest deduction 2 lacs, 50k standard deduction from salary; tax liability under old regime will reduce to 585000.