Income tax rules changes effecting from April 1, 2020

Income tax rules changes effecting from April 1, 2020

In the wake of the countrywide lockdown for dealing with the global COVID crisis, India’s Parliament, just before adjourning, enacted the Finance Bill 2020 (FB 2020). The Finance Act received Presidential assent on 27 March 2020. It contains the tax proposals for Financial Year (FY) 2020-21 (i.e. 01 April 2020 to 31 March 2021), which would be incorporated in the Income-tax Act 1961 (ITA).

We have covered below a few key changes relevant for the salaried taxpayers that are applicable from 01 April 2020:

New tax regime
Currently, the ITA comprises of various exemptions and deductions that are available to a taxpayer, subject to certain conditions and limits. In order to simplify the Income-tax law, the finance minister has introduced a new personal income tax regime from 01 April 2020, wherein lower income tax rates will apply for those individual taxpayers who forgo certain deductions and exemptions.

However, before you decide to choose which regime is beneficial, you need to keep in mind the following:

# Option to decide to be taxed under the old / new regime is available every year after ascertaining which regime is more beneficial (except for individuals with income from business / profession).