Here is a summary of the key aspects of the Union Budget 2020 from India which would impact individuals who are Resident Indians or Non Residents Indians as per their tax jurisdiction.
Personal Income Tax
- The Union Budget for 2020 has introduced an optional simplified personal income tax regime which can be used when you do not avail any deductions and exemptions available in the Income Tax rules.
- Tax payers can however continue to use all the applicable deductions and exemptions and get taxed at the existing rates.
Here is a comparison of the tax rates with and without exemptions
Some of the common deductions which are no longer available in the new tax rate regime:
- House Rent Allowance (HRA) for Salaried individuals
- Leave Travel Allowance (LTA) for Salaried individuals
- Standard deduction of Rs 50,000 for Salaried individuals
- Entertainment allowance and employment/professional tax deductions
- Popular deductions availed by individuals under Section 80C and 80CCC (PF contribution, PPF investment, Life Insurance/ULIP premium, Home loan principal payment, ELSS etc),
- Sec 80D (Health Insurance premium), 80DD and 80DDB (Disability benefits),
- Sec 80E (Education loan payments),
- Sec 80EE (Home loan interest payments), 80EEA (Additional tax benefit of 1.5L for Home loan interest payment),
- Sec 80G (Donations to charitable institutions),
- Deductions available under sections, 80EEB, 80GG, 80GGA, 80GGC, 80IA, 80-IAB, 80-IAC, 80-IB, 80-IBA etc.
Only deductions under section 80CCD (employer contribution on account of employee in notified pension scheme) and section 80JJAA (for new employment) can be claimed.
- Bank deposit insurance coverage to be increased from 1 lakh to 5 Lakhs per depositor.
- Dividend Distribution Tax abolished for companies – impact higher for folks in 25% + tax brackets.
- Taxes on ESOP’s for start-up employees deferred for 5 years or till the employee leaves the company or when they sell their stocks, whichever is earliest.
- An Indian resident will be considered a Non-Resident for taxation purposes only if they stay outside India for 240 days instead of the 182 day rule currently applicable.
- An Indian citizen who is not liable to pay tax in any other country, by virtue of their domicile or resident, will now be deemed to be a resident of India and the government will tax their global income.
- Non Resident Indians will now be allowed to invest
- Aadhaar-based verification of taxpayers is being introduced, instant online allotment of PAN on the basis of Aadhar.
- Sovereign wealth funds get 100% tax concession for investments in Infrastructure.