👀 What stays and what goes in Budget 2020

by Nireka Dalwadi

What’s happening this week?

Effects of Budget 2020

Esops are trending… Starting FY 20, employees joining startups registered post-2016 will be given an option to defer the tax payment on Esops. Apparently, employees can now choose to pay tax at the time of exit, at the time of selling the shares or 5 years post allotment. Companies are expecting to hunt talents by allocating more Esops.

Are you eligible for the New Tax Regime?… People have been debating as to which Tax Regime is better. This argument has however been tossed out of the ballpark for Individuals with Business Income. According to the Finance Bill, only salaried individuals can choose between the two Regimes. Individuals with business Income will have to stick with one regime for the coming financial year… Well, this is a mind-bender.

Amazon and Flipkart retaliate…The announcement that E-commerce Sellers will be charged a 1% TDS has let down these tech giants. A spokesperson said, “it will cause irreparable loss to the entire industry with increased compliance burden”… Is it a risk worth taking?

What Goes and What Stays

A major chunk of deductions and exemptions were removed under the New Tax Regime. Nevertheless, there are few deductions you can still claim! Let’s look at a list of all the deductions under the Finance Bill- What Stays and does not stays.

Deductions we have to part ways with as per the New Tax Regime

Chapter VIA loses its sheen… Chapter VIA has lost its mojo post Budget 2020. All major deductions under 80C, 80D, 80DD… have been slashed by the FinMin… Looks like Taxpayers are in a tight spot

Allowances that are no longer tax-exempt… A major chunk of allowances that were previously exempt from taxes has been removed. These include House Rent Allowance, Leave Travel Allowance, Transport Allowance, Entertainment Allowance & Professional Tax. Standard Deduction of INR 50,000 cannot be claimed anymore …. Will this create a sense of unrest amongst the taxpayers?

Interests on Bank Savings and Education Loans are also excluded from the list of tax-exemptions under the New Tax Regime.

What is covered- Deductions that stay

All is not lost in chapter VIA…Employer’s Contribution To Provident Fund (EPF) u/s 80CCD(2) and Deductions u/s 80JJAA (deduction in respect of employment of new employees) are still exempt from tax.

Rebate Under Section 87A to stay… For every individual earning not more than INR 5,00,000, a ‘full’ tax-rebate is allowed. But the total tax liability should not exceed INR 12,500.

Good news for House Owners… Rental income from property in India is considered as income accrued in India and taxable irrespective of residential status. The Standard Deduction on rent received is 30% of the Net Annual Value of Income from House Property is not abolished.

Salaried Individuals can still enjoy a few exemptions- Amount Received/Receivable on voluntary retirement or termination of service, Pension & Leave Encashment are exemptions that still tax-deductible. Retrenchment compensation received in respect of schemes which have been approved as well as not been approved are included. Apart from that Food Coupons & Gifts from Employers are also exempted… Is this Government’s way to increase consumption?

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