The budget of 2020 has been a huge event, and before the budget, there were these expectations about 80C limits, change in slab or reversal of the long term equity in the capital gains tax, but nothing like that happened.
The government had intentions of making things simple for the investors through the changes in the budget, but it has become more complicated for them now.
Here are the five major changes in the budget of 2020:
1. New tax slabs vs. Old tax slabs:
A new tax slab is introduced, which has low tax rates in comparison with the old one.
The investors have the option of either shifting to the new tax rates or enjoying the old tax rates, just like they were with some deductions and changes.
Which tax slab is better?
Accordingly, the new tax rates are not so much for the people who are enjoying the tax rates with deductions because they are capable of bringing down the taxable income for themselves by some decent margin.
The people who have income between 6-9 lakhs and have no exemption or deduction on tax can go with the new tax slab.
Important points to remember:
Every year, you will get a chance to choose the system, but only if you do not have any kind of business income.
For people who have a business, income cannot switch between the slabs once they choose one.
2. No deductions or exemptions under the new tax regime:
If one decides to choose the new tax regime, then they won’t be able to take benefit from the
● Medical insurance premium
● Home loan interest
● Education loan interest
● Donations under 80G
● Standard deduction of Rs 50,000
One can still take the benefit from the money put in 80 C investment products and medical insurance, but you won’t be able to take the tax benefits from it.
3. NRI definition change + Taxation rule in a change in the budget:
For this change in the budget, the rule says that if a person isn’t the resident of any country then they are deemed to be a resident of India, and they will be taxed on their global income.
There are a lot of people who aren’t residents of any country and neither stay in India, which allows them to not pay any tax, but now the change in the budget won’t allow them to do it.
4. Dividends will be taxable in the hands of investors:
The DDT is now abolished, which will be given in the hands of investors.
The people who are in the tax bracket will have to give more tax now, so it is not good news for them. The TDS will be deducted by mutual funds for 10%.
5. Bank deposit insurance raised from Rs 1 Lakhs to Rs 5 lakhs:
The insurance on the bank deposits has gone up because of the changes in the budget. It was a much-needed change for people, and now it’s finally there.