The new financial year 2020-21 has started from today (April 1) and a number of new rules will now come into effect. These include the announcements made by Finance Minister Nirmala Sitharaman in this year’s Union Budget. The good news is that the government has extended the deadline for filing income tax returns for 2018-19 to June 30 in the wake of coronavirus outbreak. However, you should be aware about all the income tax changes that are applicable from today –
New Tax Regime
The alternate tax regime announced by the finance minister in Budget 2020 will come into effect today. The regime offers new tax slabs, allowing taxpayers to pay tax at lower rates provided they forego tax deductions and exemptions. The old tax slabs will also remain in effect, giving the individuals a choice to opt for either one.
The rates under new income tax regime are – zero tax for income up to Rs 2.5 lakh; 5% for income between Rs 2.5 lakh and up to Rs 5 lakh; 10% for income between Rs 5 lakh and up to Rs 7.5 lakh; 15% for income between Rs 7.5 lakh and up to Rs 10 lakh; 20% for income between Rs 10 lakh and up to Rs 12.5 lakh; 25% for income between Rs 12.5 lakh and up to Rs 15 lakh; 30% for income above Rs 15 lakh.
Dividends to be Taxable
From April 1, the dividends received from Mutual Funds and domestic companies will be taxable at the recipient’s hands. Earlier, the mutual funds deducted a dividend distribution tax (DDT).
NPS, EPF to be taxed
Your contribution towards NPS, EPF account or superannuation fund over Rs 7.5 lakh will be taxable. The change is applicable in both the regimes. However, if you opt for the new tax slabs, you can still claim an income tax deduction on employer contribution towards employee’s NPS account.
Relief for Homebuyers
The government has given a relief to first time homebuyers. Those who are buying a house (with a value up to Rs 45 lakh) for the first time, the government has extended the date for availing additional tax benefit by a year to March 31, 2021. They will also be eligible to claim an additional tax deduction of Rs 1.5 lakh on the interest in addition to the existing deduction of Rs 2 lakh.
Benefit for Startup Employees
The employees of startups will benefit from the new tax regime as it allows deferment of tax payment on shares allotted to them under employee stock ownership plan (ESOPs). At present, ESOPs are taxable when vested options are exercised by the employees.