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All You Need To Know About The New Tax Slab To Multiply Your Savings

new tax slab

Paying taxes can be a time-consuming process because you must be familiar with the rules and regulations that govern how to do so. This article aims to help readers understand the new tax slab and the differences that exist between the Old Tax regime and the New Tax regime. Individuals have the right, as taxpayers, to prescribe to either of their options.

According to the Income Tax Act of India, income tax is levied on all individuals, HUFs, partnership firms, LLPs, and corporates. According to the slab system, individuals are taxed if their income exceeds the minimum threshold limit (known as the basic exemption limit ).

What Is The Income Tax Slab?

The government of India levies an income tax on single taxpayers, which is calculated using a slab system. This system works by categorizing various tax rates that apply to different income levels. Increases in tax rates correspond to increases in a taxpayer’s income.

This method of taxation is progressive and equitable to all taxpayers. New tax slabs are subject to change based on the Finance Bill introduced in Parliament each year. Slab rates may differ for different taxpayer groups.

So far, the categories recognized under individual taxpayers have been qualified as follows:

  • Individuals under the age of 60 (residents and non-residents included)
  • Senior citizens who are residents and are between the ages of 60 and 80.
  • Residents who are over the age of 80 are considered super senior citizens.

Income Tax Slab Rate Under New Tax Regime From FY 2020-21

The new tax regime, which goes into effect in the FY 2020-21, allows taxpayers to select one of the following options:

  • Income tax can be paid at lower rates under the New Tax regime if taxpayers are willing to give up certain permissible exemptions and deductions under income tax.
  • Taxpayers may continue to pay their taxes at the previously established tax rates. This rate is higher, allowing the taxpayer to take advantage of rebates and exemptions.

According to the New Tax regime for FY 2020-2021, the new tax slab rate is as follows and applies to all categories of individuals, namely, individuals and HUF under the age of 60, senior citizens, and super senior citizens.

What Are The Tax Benefits Offered By Life Insurance?

Life insurance is one of the most important requirements for providing a financially stable and comfortable life for your loved ones. Even in your absence, the capital benefits of life insurance policy plans help your family build a safe and secure future. Furthermore, there are income tax benefits for life insurance under Sections 80C and 10D of the Income Tax Act.

Individuals can take advantage of two types of income tax breaks when investing in life insurance policy plans over a long period:

Deductions

1. 80C/80CCC

  1. Individual assessees and Hindu Undivided Family assessees are eligible for the benefit.
  1. The individual assessee – Himself/herself, spouse, and children of such individual
  2. In the case of the HUF assessee – any member of HUF
  1. If the amount of premium paid in a fiscal year for a policy exceeds 20% of the actual capital sum assured, the deduction will be limited to premiums up to 20% of the sum assured.
  2. For insurance policies issued on or after April 1, 2012, the deduction is limited to the amount of the premium payable that does not exceed 10% of the actual capital sum assured. (15% of the actual capital sum assured in the case of a person with a severe disability or a specific ailment).
  3. The above benefits will be reversed if the policy is terminated/no longer in force within 2 years for traditional products and 5 years for ULIP products after the policy’s inception date.
  4. Section 80CCE – The maximum amount of deduction that an assessee can claim under Sections 80C and 80CCC is Rs. 150,000.

2. 80D

  1. Individual assessees and Hindu Undivided Family assessees are eligible for the benefit.
  1. In the case of an individual assessee, he or she, his or her spouse, dependent children, and parents of such individual
  2. In the case of a HUF assessee, any member of the HUF
  1. The qualifying amounts under Section 80D are up to Rs. 25,000/- for the self, spouse, and dependent children, with an additional deduction of up to Rs. 25,000/- for the parents. 

However, if the parents are senior citizens, they are entitled to a higher amount of up to Rs. 25,000/-. Within the prescribed overall limit, the assessee may make any payment for preventive health checkups up to Rs. 5,000.

3. 80DD

Premiums paid for disabled dependents are deductible up to Rs. 75,000 per year. When a dependent is a person with a severe disability, a higher deduction of Rs. 1,00,000 is allowed.

Exemptions

10 (10D)

Any sum received under a life insurance policy plan, including any bonus allocated under such policy, is tax-free. This rule, however, does not apply to the following amounts:

  1. Amount received under Section 80DD(3)
  2. Amount received under a Keyman Insurance Policy
  3. Any sum received other than as a death benefit under an insurance policy issued on or after April 1, 2003, but before March 31, 2012, and if the premium payable in any year during the policy’s term does not exceed 20% of the sum assured. The exemption would be available for insurance policies issued on or after April 1, 2012, if the premium payable for any year during the term of the policy does not exceed 10% of the actual capital sum assured. (For policies issued on or after April 1, 2013, 15% of the actual capital sum assured in the case of a person with a severe disability or a specified ailment).

Wrapping It Up:

Income tax laws can be challenging to understand. Individuals should be better equipped to understand the new tax slab after reading this article. They can now make informed decisions about whether to continue using the Old or New Tax regimes.

Because the policyholder is eligible for tax benefits under the Income Tax Act of 1961, life insurance policy plans can be useful tax planning tools (Act). Though there are numerous ways to save taxes, life insurance is one of the most effective tax planning tools. Canara HSBC plans can be used for protection, long-term savings, and tax planning.

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