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*Tax benefit is subject to changes in tax laws. Standard T&C Apply

Budget 2020- Impact of New Personal Tax Regime

With the announcement of Union Budget 2020, the highlight was the new personal income tax regime, which grabbed the attention.

Income

Income Tax (New Regime)

Income Tax (Old Regime)

Under Rs.2.5 lakh

No Tax

No tax

Rs. 2.5- 5 lakh

5%

5%

Rs. 5- 7.5 lakh

10%

20%

Rs. 7.5- 10 lakh

15%

20%

Rs. 10- 12.5 lakh

20%

30%

Rs. 12.5- 15 lakh

25%

30%

Above Rs. 15 lakh

30%

30%

With the new personal tax regime, an individual cannot claim complete 70 income tax exemptions out of the total of over 100 exemptions. Besides, the salaried taxpayers who go for the new regime will now have to forgo the standard deductions and exemptions under HRA, investments made under 80C, 80D and LTA respectively.

Under 80C, which encompasses both the Public Provident Fund and life insurance policy, a sum of up to Rs.1.5 lakh remains tax exempted. On the other hand, under section 80D, the medical insurance policy remains exempted. As said by the Finance Minister, in the coming times, all the exemptions will be ending.

With the announcement of Budget 2020, the stocks of many private life insurance companies fell in between 10-14% and one of such companies life insurance companies even fell down by 6%.

The new tax regime would be beneficial for those who have not opted for life insurance or medical insurance policy earlier. However, the millennia’s would be benefitted but that would be temporary and for a shorter duration.

What remains a challenge is to witness the government intent of wedding all the exemptions in the coming times. The insurance industry is still hopeful that it would be done gradually.

*Tax benefit is subject to changes in tax laws 

Written By: PolicyBazaar - Updated: 11 September 2020

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