Income Tax Changes for Financial Year 2020-21

Even though the income tax slabs are more or less the same as last year, Budget did bring with itself an assortment of other changes that is most likely to impact how people invest. The changes that have been introduced in this regard have been in action since 1 April 2018. Let us take a look at some of them:

  1. Standard Deduction has been Reintroduced: Instead of the earlier days of medical bill reimbursement and conveyance allowance, a Rs.40,000 standard deduction has made its way into the family! The best feature here is that even pensioners will be eligible to this. Moreover, where medical reimbursement demanded proofs and supporting documents, no such obligation is involved here. Without submitting any proofs, you will be able to claim this amount.
  2. Tax-Free Component of Medical Reimbursement and Transport Allowance has been Discontinued: Since the standard deduction of Rs.40,000 has been reestablished, the tax free element of conveyance allowances and medical reimbursements have been discontinued. In the earlier days, the conveyance allowance was free of tax up to the amount of Rs.19,200 and for medical reimbursements, this amount was Rs.15,000. The additional exemption that is provided to taxpayers has been limited to Rs.5,800.
  3. A 4% Hike in Tax Cess has been Established: The income tax slabs has remained the same as last year. However, there is a new development that has surfaced in this regard. Moving forward, the educational and higher education cess will be applied at a 4% rate.
  4. LTCGs have been Reinstated on Equity Based Mutual Funds and Stocks: The Budget has reinstated Long Term Capital Gains at a rate of 10% including cess on profits that you are earning from equity based mutual funds and stock markets. In order to qualify for this income, you have to have held the mutual funds and stocks for more than a year at least. A great bonus here is that if you have capital gains amounting to Rs.1 lakh, you will not be required to pay any tax on the same.
  5. A Tax of Dividend Distribution has been Introduced on Equity Mutual Funds: Financial year 2018-19 onwards, whatever dividend you are earning from equity mutual funds will attract a form of tax, known as dividend distribution tax. This rate of tax stands at 10%. However, if you are an investor, this dividend amount will be tax free for you. This was done to primarily equate the growth plans along with the dividends.
  6. Interest Income for Senior Citizens: There has been a significant boost in the tax exemption on the interest income earned by senior citizens in India. According to Section 80TTB, senior citizens will be exempted from tax for upto Rs.50,000, from an earlier Rs.30,000.
  7. The deduction on medical insurance policy premiums: The limit for medical insurance premiums and preventive check ups, pertaining to senior citizens has been increased from Rs.30,000 to Rs.50,000. Health care costs including basic check ups have taken a serious hike in the last few years. Considering that, this has come as a fairly good news.

Display of any trademarks, tradenames, logos and other subject matters of intellectual property belong to their respective intellectual property owners. Display of such IP along with the related product information does not imply BankBazaar's partnership with the owner of the Intellectual Property or issuer/manufacturer of such products.

This Page is BLOCKED as it is using Iframes.