Basic income tax exemption slab for AY 2021-22 as per budget 2020-21 Proposals

New Optional basic income tax exemption slab and reduced tax rates announced in budget 2020-21 for AY 2021-22 / FY 2020-21

In order to provide significant relief to the individual taxpayers and to simplify the Income-Tax law, the Union Budget proposes to bring a new and simplified personal income tax regime wherein income tax rates will be significantly reduced for the individual taxpayers who forgo certain deductions and exemptions

The following new reduced tax rates and slabs has been announced but has been made optional

New Simplified Personal Income Tax Regime

Insertion of new sections 115BAC and 115BAD for Tax on income of individuals and Hindu undivided family

Basic income tax exemption slab and tax rates for AY 2021-22

Under section 115BAC, the income-tax payable in respect of the total income of person, being an individual or a Hindu undivided family, for any previous year relevant to the assessment year beginning on or after the 1st day of April, 2021, shall, at the option of such person, be computed at the rate of tax given in the following Table

Where the option is exercised, in the event of failure to satisfy the conditions contained in sub-section (2), it shall become invalid for subsequent assessment years also and normal provisions shall apply for those years accordingly.

Deduction not available in new option:

The assessee on opting for the new Regime has to forego the following exemptions:

(i) Leave travel concession under section 10(5);
(ii) House rent allowance u/s 10(13A);
(iii) Special allowance u/s 10(14);
(iv) Allowances to MPs/MLAs u/s 10(17);
(v) Allowance for income of minor u/s 10(32);
(vi) Exemption for SEZ unit u/s 10AA;
(vii) Standard deduction, deduction for entertainment allowance and employment/professional tax under section 16;
(viii) Interest under section 24 in respect of self-occupied or vacant property 
(ix) Loss under the head income from house property for rented house shall not be allowed to be set off under any other head and would be allowed to be carried forward as per extant law;
(x) Additional deprecation u/s 32(1)(iia);
(x) Deductions u/s 32AD, 33AB, 33ABA;
(xi) Various deduction for donation for or expenditure on scientific research u/s 35;
(xii) Deduction under section 35AD or section 35CCC;
(xiii) Deduction from family pension under section 57(iia);
(xiv) Any deduction under chapter VIA (like section 80C, 80CCC, 80CCD, 80D, 80DD, 80DDB, 80E, 80EE, 80EEA, 80EEB, 80G, 80GG, 80GGA, 80GGC, 80IA, 80-IAB, 80-IAC, 80-IB, 80-IBA, etc).
However, deduction under sub-section (2) of section 80CCD (employer contribution on account of employee in notified pension scheme) and
section 80JJAA (for new employment) can be claimed

It is also proposed to amend the Income-tax Rules so as to allow only following allowances to the Individual or HUF exercising the said option :
(a) Transport Allowance granted to a divyang employee to meet expenditure for the purpose of commuting between place of residence and place of duty
(b) Conveyance Allowance granted to meet the expenditure on conveyance in performance of duties of an office;
(c) Any Allowance granted to meet the cost of travel on tour or on transfer;
(d) Daily Allowance to meet the ordinary daily charges incurred by an employee on account of absence from his normal place of duty

It is also proposed to amend rule 3 so as to remove exemption in respect of free food and beverage through vouchers provided to the employee.

This amendment will take effect from 1st April, 2021 and will, accordingly, apply in relation to the assessment year 2021-22 and subsequent assessment years.

The option shall be exercised for every previous year where the individual or the HUF has no business income, and in other cases the option once exercised for a previous year shall be valid for that previous year and all subsequent years.

The option once exercised can be withdrawn only once for a previous year other than the year in which it was exercised and thereafter, the person shall never be eligible to exercise option under this section, except where such person ceases to have any business income 

The above tax rates and income tax exemption slabs are under new simplified Personal Tax Regime which shall be optional and shall be applicable without claim to any deduction or exemptions.

Download Excel New Tax Regime tax Comparison Calculator  Click Here >>

Tax rates and slabs for Individual, HUF, association of persons, body of individuals, artificial juridical person not exercising the option as above shall remain the same as under:

(A) Individual resident aged below 60 years

(B) Senior Citizen of the age of 60 years or more but below the age of 80 years 

(C) Super Senior Citizen individual resident of the age of 80 years or more 

Surcharge on income tax for AY 2021-22:

(a) based on taxable income including capital gains on equity shares u/s 111A, 112 and 112A

(b) Based on taxable income excluding capital gains on equity shares u/s 111A, 112 and 112A

Where the total/taxable income includes any income chargeable under section 111A and section 112A, the rate of surcharge in respect of such part of income shall not exceed fifteen per cent.

Health and Education Cess: 

“Health and Education Cess” shall continue to be levied at the rate of four per cent. of income tax including surcharge

Tax Relief u/s 87A:

In case of tax payers, having total income Up to Rs. 5,00,000/- 100% rebate is retained as per previous Finance Act

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