FINANCE BILL 2020: Introduces Modification in the Income Tax Rate Structure

With the introduction of the Finance Bill, 2020 which seeks to amend the Income tax act, 1961 there has been a complete transformation in the Income tax slabs. The new amendment will provide momentum to the tax buoyancy in the long-run. It will certainly increase the direct tax base, ease of compliance, curbing tax evasion, transparency & accountability of Income tax authorities.

Income tax in India is categorized under the head of direct tax in India. Direct tax is a kind of tax that is to be paid directly to the government by the individual on whom the liability has arisen. This liability is non-transferable and this is the key differentiator between Direct tax & Indirect tax.

Direct Taxes are Broadly Categorized Under Two Heads viz.

A.    INCOME TAX: Individuals/HUF/taxpayers other than company are required to pay a certain amount of tax on the income which they have earned in the prevailing financial year.

B.    CORPORATE TAX: Just like Income tax, Companies have to pay taxes on their profit from the businesses.

What all constitutes final Taxable Income?

It’s not always the salary which is your taxable income but your taxable income is a combination of majorly five heads. To know all about these income heads, refer to the following table:

Income from salary

Wages, Pension, Annuity, Gratuity, Commission, Leave encashment, EPF Contribution

Income from House property

Rental income – property owned; other than those which are occupied by him.

Income from Profit/Gain from business or Profession

Profit in the business or gains earned in the profession, Interest received, salary/bonus to partner

Income from capital gains

Long term capital gains (LTCG)

Short term capital gain (STCG)

Income from other sources

Interest on bank deposits, securities, dividend, royalty received lotteries, gifts, etc.

A.    Income tax slab which is applicable for the F.Y. 2019-20 and onwards

  •  Individuals below 60 years. 

Less than 2,50,000


2,50,001 – 5,00,000


5,00,001 – 10,00,000  

12,500 + 20% Income above 5,00,000

Above 10,00,000

1,12,500 + 30% Income above 10,00,000

  • Individuals above 60 years and less than 80 years.

Less than 3,00,000  


3,00,001 – 5,00,000  


5,00,001 – 10,00,000  

10,000 + 20% Income above 5,00,000

Above 10  

1,10,000 + 30% Income above 10,00,000

  •  Individuals above 80 years.

(Figure in Lacs)

Less than 5,00,000


5,00,001 – 10,00,000  


Above 10,00,001

1,00,000 + 30% Income above 10,00,000

[Note: Surcharges applicable]

  • Total Income above 50 Lacs but less than 1 Crore     – 10% on computed Income tax.
  • Total Income above 1 Crore but less than 2 Crore      – 15% on computed Income tax.
  • Total Income above 2 Crore but less than 5 Crore      – 25% on computed Income tax.
  • Total Income above 5 Crore                                         – 37% on computed Income tax.

B.    Income tax slab which will be applicable from F.Y. 2020-21

An additional option is given to the Income taxpayers in the Union budget 2020-21. Considering the slump in the economy and increasing the Income tax base, these new amendments in the Income tax act, 1961 are made flexible.

On satisfying a certain set of conditions, a HUF or an individual has the option to pay tax in the new Direct tax regime (F.Y. 2020-21 Onwards).

Less than 2,50,000


2,50,001 – 5,00,000  


5,00,001 – 7,50,000  


7,50,001 – 10,00,000


10,00,001 – 12,50,000  


12,50,001 – 15,00,000  


Above 15,00,000


However, this new Direct tax regime which has come out to be one of the biggest taxation reform in the Income tax act, 1961 since Independence brings in some criteria which is to be fulfilled.

  • The option once exercised for a previous year shall be valid for that period and subsequent years.
  • The option will become invalid in any previous year if the taxpayer fails to comply with the provisions of the act.
  • The provision which needs to be compiled for this new income tax slab rates is that the total income computed is without:
    • Exemption or deductions.
    • Setting off any losses of the previous year.
    • Making necessary adjustments for depreciation.
    • Allowances/pre-requisites or whatsoever name they are called.


Q.   How is Income tax calculated?

  • Income tax is calculated on the basis of the Income tax slab in which your Income range falls in. There are different sets of Income tax slabs depending on the age bracket you come under viz. Below 60 years, 60-80 Years & above 80 years.
  • An individual’s final taxable income is calculated by making out some relevant exemptions/deduction from the income or  TDS,  which you have already paid and it needs to be reduced from your taxable salary.

Q.      What is the minimum salary to pay Income tax?

  • For different age groups the minimum salary which is to be taxed is different, but with the recent amendments in the Income tax act, 1961; the limit of rebate under section 87A have been increased and now tax-payers earning an Income up to INR 5,00,000 will not have to pay Income tax.
  • So, a minimum salary which is chargeable to Income tax is 5, 00,001 & above.

Q.      What is the difference between Direct tax & Indirect tax?

Direct Tax

Indirect Tax

Paid by individuals, HUF, firms, companies, etc.

Paid by the end consumer of goods & services

The burden of Income tax cannot be shifted

The burden of tax can be shifted

For ex: GST

Reduce inequalities in society & it is progressive in nature

Enhance inequalities and are regressive in nature

Paid directly by a concerned person

Paid ultimately by the final consumer

Income Tax collection is difficult

Indirect tax collection is easier

For example Income tax, wealth tax, corporate tax, etc.

For example GST, Excise duty, customs duty, CVD, etc.

Q.      What is Income tax as per Income tax act, 1961?

  • Income tax is a part of your income which you have earned in the complete financial year from various sources such as Income from salary, house property, Profit & gains from business, capital gains and various other sources.
  • With a combination of all these Income sources, the Income tax authorities are able to compute the combined taxable Income of an individual.

Q.       How is advance tax calculated?

 As the name suggests, advance tax is something that is paid in advance even before the tax liability has arisen. It is also termed as pay as you earn tax and it is paid in advance instead of a lump-sum payment at the end of the financial year.

Q.    What is the last date for advance Income tax filing?

Prior to 15th June

15% of advance tax

15 June-15 September

45% of advance tax minus advance tax already paid

15 September-15 December

75% of advance tax minus advance tax already paid

15 December-15 March

100% of advance tax minus advance tax already paid

Q.      How to file an Income tax return (ITR)?


  •  Go to e-Filing portal on Income tax website 
  • Enter PAN Card number which is the user ID, Password, Captcha code and then 'Login'.

  • Tap on the 'e-File' and then 'Income Tax Return' link.
  • Select Assessment Year, ITR Form Number, Filing Type, Submission Mode and Submit Online.
  • Click on 'Continue'
  • E-verify your Income tax return (ITR)

Q.      What is the procedure for the e-verification of ITR?

1.    Popularly there are two methods of ITR Verification which is:-

1.1.  OFFLINE METHOD (Paper verification): Physically send signed ITR-V through normal or speed post to "Centralized Processing Centre, Income Tax Department, Bengaluru”. Send a signed copy of the ITR-V form to Bengaluru for verification.

1.2.  ONLINE METHOD (Electronic verification): On Choosing 'I would like to e-Verify' option, e-Verification can be done through any of the following methods.

There are 5 ways of electronically verifying your ITR.

  • E-verification with Aadhar OTP
  • E-verification with Net Banking
  • E-verification with Bank Account
  • E-verification with Demat Account
  •  E-verification with Bank ATM

2.     Click on 'Preview and Submit' button, Verify all the data entered in the ITR.

3.     Submit the ITR.


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