The Financial Year 2019-20 closed on March 31 and the new FY 2020-21 will begin from April 1. In wake of the 21-day lockdown, the government has extended the deadline for filing income tax returns for the FY 2018-2019 to June 30. In the Union Budget presented in February 2020, the government has made some changes to the income tax rules. These changes will come into effect from today:
1) New Tax slabs will come into effect from April 1. But taxpayers are free to choose between the old and the new tax slabs. Under the new tax rates, there is zero tax for income up to Rs 2.5 lakh; 5 percent for income between Rs 2.5 lakh and up to Rs 5 lakh; 10 percent for income between Rs 5 lakh and up to Rs 7.5 lakh; 15 percent for income between Rs 7.5 lakh and up to Rs 10 lakh; 20 percent for income between Rs 10 lakh and up to Rs 12.5 lakh; 25 percent for income between Rs 12.5 lakh and up to Rs 15 lakh; 30 percent for income above Rs 15 lakh.
2) Dividends received from mutual funds and also from domestic companies from April 1 will be taxable at the recipient's hands. Dividends which the recipients will earn from their mutual fund investments will now be taxed at the recipient's slab rates. Till the last financial year, the dividends received from mutual funds were tax-free but what the mutual funds used to do was charge a dividend distribution tax at a rate of 11.2 percent.
3) If any employer's contribution exceeds Rs 7.5 lakh in an FY towards the NPS, superannuation fund or EPF, the amount will be taxable in the hands of the employee. This particular change would be applicable to both old and new income tax regimes.
4) The date for availing tax benefits for those who have purchased their first house for Rs 45 lakhs or less, has been extended to March 31, 2021. Individuals who have taken loans to purchase houses up to Rs 45 lakh will be qualified to claim an additional tax deduction of Rs 1.5 lakh on interest. Addition to this would be an already existing deduction norm of Rs 2 lakh.
5) The new tax rules which will be applicable from April 1, allow the deferment of tax payments on shares allotted to start-up employees under ESOPs or under stock ownership programmes. The tax payment has been deferred from the established exercise date to 48 months after the exercise, of shares.