budget 2020 / Tax can be reduced from 20% to 10% on income from 5 lakh to 10 lakh

The budget is expected to get the highest income tax relief this year. In view of the decline in GDP growth, the government reduced corporate tax in September, since then expectations of personal income tax cuts have increased.

In some reports it was said that the income tax exemption limit could be increased from the current Rs 2.5 lakh to Rs 5 lakh or Rs 7 lakh. However, as the budget time draws closer, it is now being said that the government may not increase the exemption due to falling behind the target of tax collection, but may make such changes in tax rates that provide relief to the lower and middle income people. One of these measures is to reduce the tax rate on income from 5 lakh to 10 lakh rupees from 20% to 10%.

Doing so will benefit around 1.5 crore individual taxpayers. For the financial year 2017-18 (assessment year 2018-19) 5 crore 52 lakh 60 thousand 219 returns were filed in the individual category. Out of these, 27% i.e. 1 crore 47 lakh 54 thousand 245 people were having income from 5 lakh rupees to 10 lakhs.

If tax is reduced from 20% to 10%, then taxable income of Rs 10 lakh will save Rs 46800

Now when 20% tax is imposed, 10% tax is levied
Standard deduction: Rs 50 thousand Standard deduction: Rs 50 thousand
Tax on the remaining Rs 9.5 lakhs Tax on the remaining Rs 9.5 lakhs
0% up to 2.5 lakh rupees 0%
2.5 Lakhs to 5 Lakhs 5% (Rs 12,500) 2.5 Lakhs to 5 Lakhs 5% (Rs 12,500)
20% on the remaining 4.5 lakhs (Rs 90,000) 10% on the remaining 4.5 lakhs (Rs 45,000)
Total: 1 lakh 2 thousand 500 rupees Total: 57 thousand 500 rupees
4% Cess: Rs 4,100 4% Cess: Rs 2,300
Total tax liability: Rs 1 lakh 6 thousand 600 Total tax liability: Rs 59 thousand 800 Savings: Rs 46,800
80C deduction not included in tax calculation

Full rebate through rebate in tax on income up to 5 lakhs
According to the announcement of the interim budget last year, income up to Rs 5 lakh is tax free. However, this rebate will be available through rebate. That is, if your income is more than 2.5 lakh rupees, then the return will have to be paid, it is a different thing that rebate will be available in the tax on income above Rs 2.5 lakh and up to Rs 5 lakh. This time the discussion is also that the income up to 5 lakhs can be completely tax free in the budget. If this happens, the people of such income will not need to file the returns from next year.

Task Force Recommendation: 20% tax on income from 10 lakh to 20 lakh

The task force formed in November 2017 to draft the new direct tax law submitted its report to the government on 19 August 2019. The government may also consider the task force’s report in the budget. However, the government has not made public the recommendations of the task force. However, according to the information revealed through the sources, the Task Force has made these recommendations on the tax slab-

Annual Income (Rupees) Tax Rate
0% up to 2.5 lakhs
2.5 Lakh to 10 Lakh 10%
10 to 20 lakhs 20%
20 Lakh to 2 Cr 30%
35% over 2 crores
Recommendation to increase standard deduction to 60 thousand rupees
The task force has also suggested raising the tax exemption limit from Rs 5 lakh to Rs 6.5 lakh. Apart from this, standard deduction has been asked to increase from the current 50,000 to 60,000 rupees. These changes in the tax system may cost the government more than Rs 30,000 crore.

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