Know about the New Tax Regime that Came Into Effect from 1st April 2020

HEALTH INSURANCE PLANS


Know about the New Tax Regime that Came Into Effect from 1st April 2020

What Reforms are Covered Under IT Slabs for AY 2020-21?

The Union Budget 2020 has introduced a new income tax slab by reducing income tax rates and rearranging them to lower the tax liability of individuals. This new income tax regime is optional and will coincide with the old one with the three income tax slabs and different exemptions that apply to the taxpayer. This new income tax slab has been effective from this year.   

Finance Minister Nirmala Sitharaman has introduced an optional income slab system for individual taxpayers who are less than 60 years of age. According to this new slab system, you  can select to file your income tax under either of the two slab systems. 

As per the new tax regime, the tax exemption limit mainly depends on an individual’s age and residential status. Depending on their age, the taxpayers are divided into three categories.

  • Individuals under the age of 60 years
  • Senior citizens in the age bracket of 60-80 years
  • Super senior citizens above the age of 80 years

Mentioned below are the various income tax slabs as per the latest Income Tax Slab for the AY 2020-21.

Total Income Tax Rate according to the new tax regime
Upto 2.5 lakhs Nil
Rs. 2,50,001-5,00,000 5%
Rs. 5,00,000-7,50,000 10%
Rs. 7,50,001-10,00,000 15%
Rs. 10,00,001-12,50,000 20%
Rs. 12,50,001-15,00,000 25%
Above 15,00,000 30%

 These new tax rates are applicable to those who do not want to get specified exemptions or deductions. The lower tax rates will be applied to the total income without any benefit of deductions and exemptions. The deductions that are not allowed in this regime are as follows:

  • Standard deduction from salary
  • Housing Loan Interest
  • Leave Travel Allowance
  • House Rent Allowance

Deductions as per Chapter VI A of the Income Tax Act, 1961 such as Section 80 CCC(pension premium), 80D(health insurance premium) and 80 TTA(Bank interest). Mentioned below is the income tax slab for individuals below the age of 60 years:

Total Income Tax Rate and cess
Upto 2.5 lakhs Nil
Rs. 2,50,001-5,00,000 5% of(Total income above 2.5 lakhs)+4% cess
Rs. 5,00,000-7,50,000 10%(Total income above 5 lakhs)+4% cess
Rs. 7,50,001-10,00,000 15%(Total income above 7.5 lakhs)+4% cess
Rs. 10,00,001-12,50,000 20%(Total income above 10 lakhs)+4% cess
Rs. 12,50,001-15,00,000 25%(Total income above 12.5 lakhs)+4% cess
Above 15,00,000 30%(Total income above 15 lakhs)+4% cess

The below tax slabs is similar for the ones in the age group of 60-80 years. 

Total Income Tax Rate and cess
Upto 3 lakhs Nil
Rs. 3,00,001-5,00,000 5% of(Total income minus 3 lakhs)+4% cess
Rs. 5,00,001-10,00,000 Rs.10,000+20%(Total income minus 5 lakhs)+4% cess
Rs. 10,00,001-above Rs.10,000+30%(Total income minus 10 lakhs)+4% cess

 The below tax slab is for the super senior citizens above the age of 80 years 

Total Income Tax Rate
Upto 5 lakhs Nil
Rs. 5,00,001-10,00,000 20%
 Above 10,00,000 30%

 Anyone earning up to Rs.7,50,000 per annum, the revised tax structure works well, considering that there is a 10% decrease in the tax charge, which is more than Rs. 5,00,000. Those earning a higher income may avail tax exemptions as per the old tax structure. It mainly depends on an individual’s ability to invest across all tax-saving instruments. 

>> Also read how health insurance is a tax bonanza for you

Final Word

The Union Budget has provided a new tax regime for individuals to opt for tax benefits without claiming any deductions. It will be important for the working-age group to focus on their savings for their future needs, such as children’s future and post-retirement life. Also, you  need to safeguard your family’s health. 

Individuals can calculate their income tax after considering these income tax slabs and how they work. You can also save income tax by investing in a health insurance policy. A health insurance policy helps you in saving tax annually. As per the Section 80D of the Income Tax Act, you can avail tax exemption depending on the premium paid for a health insurance plan.The coverage provided by a health insurance policy can be availed by you and your family members. This will help you in your savings and you will also get tax benefit.

Disclaimer: The above information is for reference purposes only. The medical insurance tax exemption are subject to the rules and regulations of the Income Tax Act of India 1961.

View Our Editorial Policy


GET FREE QUOTE

+91 verified
Please enter a valid mobile number
Please enter a valid Full Name
I have read and agree to the Terms & Conditions
Please select terms and conditions
Get updates on WhatsApp
CALCULATE PREMIUM

Articles By Category

Health Insurance Articles
Family Family
Senior Citizens Senior Citizens
Maternity Maternity
Surgery Surgery
Heart Heart
Tax & Investments Tax & Investments
Lifestyle Lifestyle
Awareness Days Awareness Days
Child Care Child Care
Money Saving Tips Money Saving Tips
Festive Days Festive Days
Covid-19 Covid-19
Travel Insurance Articles
International International
Student Student
Travel Tips Travel Tips
Visa Visa
Passport Passport
Insurance Guide
Health Health
Travel Travel

Secure Your Finances Now!

Get the best financial security with Care Health Insurance!

+91
verified

Reach for Services at
whatApp Icon8860402452


question_answer

Chat with Us

Please Select Chat Option ×
Buy New policy To explore and buy a new policy
Existing policy enquiry for assistance with your existing policy