INCOME TAX

Income tax is levied by the Central Government on the income that is earned during a financial year by the individuals and the business. The taxes are considered to be a source of revenue for the government. The revenue that is collected from the source of tax is then utilized on developing infrastructure, proving better healthcare, education subsidies to the farmers or people employed in the agriculture sector, and also for the government welfare schemes.

Taxes in India are of two types Direct tax and Indirect Tax. The tax that is levied directly on the income is called Direct tax. For instance, Income tax is a direct tax and the calculation of the tax is based on the income tax slab rates that are applicable during a given financial year.

The income Tax law taxes all of these taxpayers differently according to the slab rates. For the Indian Companies and the firms, the taxes are computed based on the profits earned whereas for individuals, the Hindu Undivided Family and, the Association of Person and Body of Individuals the taxes are based on the slab rates prescribed by the Income-tax department. The 2020 budget made way for the New Tax regime for individuals and HUF taxpayers.

Income Tax was levied as per the old regime had 3 slab rates for the levy of the Income-tax which are 5%, 20%, and 30% of the income. Options are given to continue with this old tax regime where Leave travel concession, the house sent allowance, and certain other allowances can be claimed as deductions. In addition, the deduction for saving investments as per section 80C (LIC, PPF) to 80U can also be claimed. The Income-tax slab rates for the taxpayers under the old regimes are as follows.

A new tax regime can be opted by the Individuals and the Hindu Undivided Families from 2020-2021 with the lower tax rates. But the new tax regimes do not support any deductions. An individual can choose the old or the new regime. The new tax regime is optional and then the decision shall be made while filing the income tax returns. The income tax slab rates under the new tax regime are as follows:

By opting for a New Tax regime the deductions and exemptions are not allowed. However, the only exemption and deduction allowed under the new tax regime are:

In case of a specially-abled person transport allowances are allowed

As a part of the employment, the conveyance allowance is received to meet the conveyance expenditure

Any compensation that is received to meet the cost of the travel on tour or transfer.

The daily allowance that is received to meet regular expenditure occurred in the absence of the regular place duty.