The income tax calculation for the employees without PAN is similar to the previous budget. This calculation is also the same for old and new regimes. If the income of employees falls under the tax rate of 20%, then the employees will be charged 20% tax irrespective of the tax rates. For the employees falling under the tax rate higher than 20%, the tax will be deducted according to the actual tax calculation. Let’s understand the tax calculation for employees without PAN with the help of the following table:
| Old and New Regime Income Tax Rates | Tax Rates for employees without PAN |
|---|---|
| 0% - 20% | 20% |
| 25% | 25% |
| 30% | 30% |
The Union Finance Minister has presented the budget for the Financial Year 2020-2021. A new regime is introduced in the budget 2020-2021. These changes will have an impact on the income tax calculations w.e.f April 2020.
Based on the new budget, taxpayers (employees) can now select between the old regime and the new regime to calculate income tax. The old regime has older tax rates and exemption components as in the previous financial year. The new regime will have lower tax rates and a few numbers of exemptions.
The tax slab rates as per the Old and New regime are as follows:
| Income Tax Slabs | Old Regime | New Regime | Surcharge Rate |
|---|---|---|---|
| ₹0 - ₹2.5 lakh | exempted | exempted | 0 |
| ₹2.5 lakh - ₹5 lakh | 5% | 5% | 0 |
| ₹5 lakh - ₹7.5 lakh | 20% | 10% | 0 |
| ₹7.5 lakh - ₹10 lakh | 20% | 15% | 0 |
| ₹10 lakh to ₹12.5 lakh | 30% | 20% | 0 |
| ₹12.5 lakh - ₹15 lakh | 30% | 25% | 0 |
| ₹15 lakh - ₹50 lakh | 30% | 30% | 0 |
| ₹50 lakh - ₹1 crore | 30% | 30% | 10 |
| ₹1 crore - ₹2 crore | 30% | 30% | 15 |
| ₹2 crore - ₹5 crore | 30% | 30% | 25 |
| ₹5 crores and Above | 30% | 30% | 37 |
Under the old regime, taxpayers will continue to enjoy the same benefits and deductions as before. Under the new regime, tax rates are lower than before, provided taxpayer let goes of the following exemptions and deductions:
- Under section 16 - Standard Deductions, Entertainment allowances, Employment/ Professional tax.
- House Rent Allowance (HRA)
- All chapter VIA section - 80C, 80CCC, 80CCD, 80D, 80DD, 80DDB, 80E, 80EEA, 80EEB, 80G etc {Excluding Section 80CCD(2)}
- Leave Travel Concession (LTA)
- Under section 10(14) - Special Allowance such as Children education allowance, Hostel Allowance, Transport Allowance, Uniform Allowance, etc
- Under section 24 - Interest on borrowed loan for a self-occupied property.
- Set off of any loss, under the head “Income from house property” with any other head of income.
Similarities in Old and New Regime
The following calculations are common for both the old and new regime:
- Rebate under the section 87A: Taxpayers who have an annual income up to Rs 5 lakh, will continue to get a tax rebate of Rs 12,500 on the tax calculated.
- Health, Education Cess, and Surcharge Rates remain the same.
Tax Comparison Examples: Old and New Regime
To understand the difference between the calculations of old and new regime, we have provided two examples. The first example shows income tax calculation if the taxpayer has made certain investments and the second example shows income tax calculation if the taxpayer has not made any investment.
Scenario 1: Assume that taxpayer has invested in 80C, 80D and have HRA. Tax under both regimes will be calculated as follows:
| Old Regime Calculation | New Regime Calculation | |
|---|---|---|
| Gross Income | 850000 | 850000 |
| Tax on Employment: Sec 16(iii) | 2400 | 0 |
| Standard Deduction: Sec 16(ia) | 50000 | 0 |
| House Rent Allowance: Section 10(13A) | 100000 | 0 |
| Leave Travel Assistance: Sec. 10(5) | 60000 | 0 |
| 80C exemption | 150000 | 0 |
| 80D exemption | 25000 | 0 |
| Taxable Income | 462600 | 850000 |
| Calculated tax | 10630 | 52500 |
| Rebate u/s 87A | 10630 | 0 |
| Net tax + Cess | 0 | 54600 |
Scenario 2: Assume that the taxpayer has not done any investments. Tax under both regimes will be calculated as follows:
| Old Regime Calculation | New Regime Calculation | |
|---|---|---|
| Gross Income | 850000 | 850000 |
| Tax on Employment: Sec 16(iii) | 2400 | 0 |
| Standard Deduction: Sec 16(ia) | 50000 | 0 |
| Taxable Income | 797600 | 850000 |
| Calculated tax | 59520 | 52500 |
| Rebate u/s 87A | 0 | 0 |
| Net tax + Cess | 61901 | 54600 |
Additional Changes in Budget 2020-2021
Others Changes introduced in Budget 2020-2021:
- Section 80EEA extended: Loan date is extended from 31st March 2020 to 31st March 2021. An individual can claim additional interest of Rs.1.5 Lac (over and above existing Rs. 2 Lac), if the individual has taken a loan between 1st April 2019 and 31st March 2021.
- If the Employer’s contribution towards PF, NPS or any recognised superannuation exceeds INR 7,50,000 per annum, the excess amount would be treated as perquisite and will become taxable.
To know more, click here to find a copy of the finance bill.