The announcement of the Union Budget in February 2020 was much awaited and revealed a host of changes. With experts terming it as a pro-middle class budget, the goal of the Union Budget 2020 was to boost purchasing power and incomes. In light of these developments, before you turn to the services of an income tax calculator when filing your income tax return for the financial year, take a look at what these new additions are. Explained below are 5 key changes.
Introduction of the New, Optional, Tax Regime
As per the Union Budget 2020, you can now choose to opt for the new tax regime, enjoy lower tax rates, while foregoing certain deductions and exclusions. The existing tax regime levies income tax across 3 income slabs, i.e. 5% for income between Rs.2.5 and Rs.5 lakh, 10% for incomes between Rs.5 lakh and Rs.10 lakh and 30% for incomes over Rs.10 lakh. On the other hand, with the new tax regime, incomes are taxed as follows.
Contributions to EPF, Pension and Superannuation Are Now Taxable
As per Budget 2020, employees will now be taxed for EPF, pension and superannuation contributions of over Rs.7.5 lakh annually. This mainly affects high-salaried individuals and any excess over Rs.7.5 lakh will be added to the taxable income of the employee. It’s important to note that only the employer’s contributions over Rs.7.5 lakh are taxable, and this tax will have to be borne by the employee.
Launch of the ‘Vivad SE Vishwas’ Scheme to Settle Tax Disputes Easily
The Vivad Se Vishwas scheme announced in the 2020 Union Budget hopes to provide respite to those taxpayers with pending tax disputes. Under this scheme, as a taxpayer, should you choose to pay your due taxes that are under dispute by 31 March, 2020 you can have the entire penalty and interest waived off. However, it is also important to note that if you can’t meet the March deadline, you have until 30 June 2020 to pay your taxes but it will cost you an additional 10%. In the event that just the interest and penalty are under dispute, you can pay 25% of the total disputed sum by 30 March 2020, or 30% by 30 June 2020.
Abolition of the Dividend Distribution Tax
As per Budget 2020, dividends from mutual funds are now taxable in the hands of investors, as per the investor’s slab rate. This change will come into effect from FY 2020–21. As it currently stands, equity fund dividends attract DDT of 11.65% and debt fund dividends attract DDT of 29.12% and once this amount is deducted, dividends are tax-free in the investor’s hands. Going forward, the change in taxation will mean that investors in the higher tax brackets will have an increased tax burden.
Extension of Deadline to Avail Benefits Under Section 80eea
In order to minimise the impact of buying a home, first-time homebuyers with a home loan were allowed to claim an additional Rs.1.5 lakh deduction towards loan interest payments, as per the Finance Act 2019, under Section 80EEA. This was provided the home’s stamp duty value didn’t exceed Rs.45 lakh. Moreover, this deduction was over and above the deduction of Rs.2 lakh offered by Section 24. However, an important condition to note was that this benefit would only be available for home loans issued between 1 April 2019 and 31 March 2020. However, to extend the benefit to more first-time home buyers, this provision’s deadline has been pushed to 31 March 2021.
This is great news for prospective first-time homeowners as it effectively raises the tax total deductions available in lieu of interest repayment to Rs.3.5 lakh. This results in incredible savings and in conjunction with the affordable housing initiatives in effect across the nation, you can now buy your first home in a city of your choice on cost-effective terms, provided you opt for the right home loan.
To that end, the Bajaj Finserv Home Loan is a particularly notable option to consider as it offers a sizable sanction alongside other value-added benefits. Here, you can avail a sanction of up to Rs.3.5 crore at a competitive rate of interest and choose to repay it over a tenor of up to 30 years. What’s more, you can also avail interest subsidy as a PMAY beneficiary and get access to property search services and expert counsel.
So, now that you know how to make the most of the income tax changes in 2020, consider investing in your first home. All you have to do is fill the online application form to get started.