5 changes in Income tax rules

New Income Tax rules

The new Financial Year 2020-21 (FY 2020-21) will see five changes in the Income-tax rules, which is in accordance with the budget presented this year. These changes were declared by the Finance Minister Nirmala Sitharaman. The Income Tax Department has given relief and extended the last day of filing the taxes to June 30th. This extension has come into effect due to the COVID-19 crisis, which has paralyzed the country and its financial machinery. 

In FY 2020-21, the taxpayers can choose from any of the two income tax regimes declared by the Finance Minister in her budget speech. The new Tax regime allows taxpayers to pay taxes at lower rates in lieu of certain tax deductions and exemptions.

Further, dividends earned from Mutual funds and other domestic funds will be taxable in the new Financial Year. Erstwhile, the mutual funds companies used to deduct taxes at source, in the form of dividend distribution tax (DDT).

The new financial year will also see changes in taxes related to NPS and EPF. As per the change in the rule, the NPS, EPF accounts will be taxable for contributions higher than 7.5 lakhs. However, the new tax regime offers a tax deduction claim on the employer’s contribution towards the employee’s NPS funds.

The new homebuyers will be given relief in FY 2020-21. The new homebuyers buying an asset up to 45 lakhs, can avail the additional tax benefit by March 2021. Also, they can claim an additional tax deduction of Rs. 1.5 lakhs.

The employees working for startups have also been offered tax relief. Such employees will not have to pay any tax on the received ESOPs.

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