New Income Tax rules for FY 2020-21 wef April 2020

New Income Tax rules

On February 1st the Finance Minister Ms. Nirmala Sitharaman had introduced certain changes in Income Tax rules, which will come into effect from 1st April 2020. The new financial year has started from April 1st. In Financial Year 2020-21 taxpayers will have an option to choose from the two tax slabs declared by the Finance Minister. One may opt for the old tax slab or choose to switch to the new tax slab. The new tax regime appears to be heavily loaded for investors in higher tax brackets and may ease the burden from taxpayers in lower tax brackets.

In FY-2020-21 the dividends earned from mutual funds or similar domestic funds will be taxable. Also, for salaried employees, the contribution to NPS, EPF, and Pension Fund increasing Rs. 7.5 lakh a year will be taxable. These rules will be equally applicable to both the old as well as the new tax slabs.

For new house buyers, the additional tax benefits have been extended for one more year till 31st March 2021. Additional tax benefits are available to the first-time house buyers, provided the cost of the house is up to Rs. 45 lakhs. Under this scheme, the house buyer may get a tax rebate of Rs. 2 lakhs, if he avails loan for the purchase. Additionally, the buyer may also avail an extra tax rebate of 1.5 lakhs on interest.

In FY2020-21, employees working for startup enterprises have been exempted from paying tax on ESOPs.

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