Every eligible candidate has to file the income tax returns in obedience to norms & regulations. There are some significant changes in the Income Tax Rules for the new financial year 2020-2. It started on April 1 2020. The FM Nirmala Sitharaman has introduced some significant changes, significant changes in the Income Tax Rules, and the union budget 2020-21. She also introduced a new optional tax regime from April 1, 2020.
It includes certain deductions and exemptions for the people who opt for such a regime. New section 115BAC got the proposal of introducing to provide tax at low rates. Individuals and HUF can opt for such a regime if they do not have a business. They can go for such a scheme even if they stop having the business income.
The ten significant changes for FY 2020-21 are as follows:
There are certain changes in the tax rules for the income tax slab for ay 2020-21 are as follows:
1. The last date of filing is extended
July 31 is the last date for filing ITR, and 3oth November 2020 is the extended due date. You can file the returns by July 31 and October 31, 2020, and till November 30, 2020. They also extended the date for the furnishing audit tax report to October 31, 2020.
2. No tax on notional income
There is another change in the income tax rule. The tax is applicable on notional income. In the last year, the rule was that the second house property owner had to pay the notional rent taxes. There will be no tax on notional income in this financial year. According to the new income rule, you do not need to pay TDS for the more than forty thousand Fixed Deposits (FDs) and Recurring Deposits (RDs). The band used to debit 10% TDS in case of more than Rs. 10000/year FDs and RD till the last year.
3. Health capital gain
According to section 50C, if the value receives for stamp duty stays within 110% of the actual consideration received, then redeem of received consideration can occur to be the total value of consideration for computing capital gain. After the amendment, it became 110%, but it was 105% before that. According to the head of House Property under section 80EEA, if one sanctions the loan within 31st March 2021, he will get the interest on the home loan with the additional deduction of Rs 1.5 lakh.
4. Dividend taxable
From now, tax is applicable to the dividend received from mutual funds and domestic companies. For example, if you earn dividends from the mutual funds, you need to pay the tax at the taxpayer's slab rates. Previously, there was no tax on dividend, but the deduction rate of dividend distribution tax was 29.12% for debt-oriented funds and 11.2 % for equity-oriented funds.
5. Due tax interest
The tax burden on investor increases due to the new tax regime on higher tax slabs, but it will lower individuals' burden in low tax slabs. TDS at the rate of 10% applies to an investor who receives over Rs. 5000 dividend in a financial year. The government has decreased the interest rate by 9%, for example- 0.75% month instead of 1%/month.
6. Home loan for first-time buyers
If a house owner takes the loan up to Rs. 45 lakhs, he can claim an additional tax deduction of Rs. 1.5 lakhs on interest. It is additional to the existing deduction of Rs 2 lakhs. Previously, this deduction was applicable on a housing loan that was sanctioned before March 31, 2020. Most importantly, Rs 45 lakh is the value of the home as per the stamp duty.
7. New Tax Regime
If you avail of the lower rates, it will come under the New Tax Regime. Otherwise, you need to pay taxes as per Old Tax Regime. According to the new tax regime, you can delay tax payment if the shares are allotted to employees of employee stock ownership plan or startups under ESOPs. Under the new tax regime, the new income slabs and tax rates are as follows:
· Up to Rs 2.5 lakh – Nil
· From 2,50,001 to Rs 5 lakh – 5%
· From 5,00,001 to Rs 7.5 lakh – 10%
· From 7,50,001 to Rs 10 lakh -15%
· From 10,00,001 to Rs 12.5 lakh – 20 %
· From 12,50,001 to Rs 15 lakh – 25 %
· Above Rs. 15 lakh – 30%.
8. Young individuals can enjoy the new tax regime
A person who can enjoy the new tax regime's benefits may be young individual taxpayers. They do not commit recurring expenses like tuition fees of children, insurance etc. This is the same for senior citizens, as well.
9. Will get an allowance for investments
There is good news for you if you cannot save income tax for FY 2019-20 because of the lockdown. Taxpayers got the allowance of investing in NSC, PPF, ELSS or any other tax-saving scheme. If you have made tax investments already, you can invest till June 30. You can also avail of tax benefits for the financial year 2020-21. The income tax slab for FY 2019-20 ay 2020-21 is not the same.
10. EPF contribution and InvIT exemption
Interest on the share of contribution employees to Provident Fund of employees will become taxable during withdrawal of more than Rs.2.5 lakhs in a year. This will cause additional tax liability the individuals making higher contributions. EPF, NPS and superannuation fund and interest can make EPF a less attractive retirement scheme.
After the declaration/payment of the dividend, the advance tax liability on dividend income shall increase as per the government's proposal. The government made dividend taxable in the hands of shareholders in the budget last year and abolished dividend distribution tax to incentives investment. The income tax slab for ay 2020-21 for female is also different from the last year.
The beginning of the FY 2020-21 is April 1, and March 31 is the last date. All earning during the financial year is assessed in the AY. Equity shareholders and equity mutual fund investors receive the dividend, which becomes taxable per one's income tax slab. Dividend
Distribution Tax (DDT) deduction was 11.64% before receiving the dividend amount.
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