Finance Minister Nirmala Sitharaman had announced new Income Tax slabs during her budget speech on February one which come into effect from today.
India has officially entered the new financial year 2020-21, and though things may not have changed much since yesterday due to the 21-day nationwide lockdown to slow the spread of the COVID-19 pandemic, there are some changes with respect to finances and banks which come into effect starting Wednesday.
The finance ministry had already extended the deadline of some compliance dates which remain after the start of the new financial year. But there are new tax regimes, the abolition of dividend distribution tax (DDT) and the merger of public sector banks which come into effect. Here are all the major changes that come into effect:
New income tax slabs
Finance Minister Nirmala Sitharaman in her Budget speech on February 1 had announced a new income tax structure for individual taxpayers who are willing to forego certain exemptions and deductions.
As per the new structure announced by the finance minister, people with an income up to Rs 5 lakh will not have to pay any income tax, while those earning between Rs 5 lakh up to 7.5 lakh will have to pay 10 per cent tax on their income, and those earning between Rs 7.5 lakh up to 10 lakh will have to pay 15 per cent tax.
An individual with an income between Rs 10 lakh to Rs 12.5 lakh will pay 20 per cent tax, and those with an income above Rs 15 lakh will pay 30 per cent tax. All these changes are effective for those who choose the new system starting today.
However, the old income tax slabs will continue to exist. This will allow individual taxpayers to select any one of the tax regimes.
Dividend Distribution Tax (DDT) abolished
The finance minister had announced the abolition of dividend distribution tax (DDT) with effect from April 1. She had said that dividends will now be taxed in the hands of individuals who received them, as per the new tax slab.
So far, companies based in India had to pay DDT on dividends declared, distributed or paid to shareholders at 15 per cent along with the applicable cess, surcharges etc. These rates now stand abolished.
This new rule is going to be applicable to both the old as well as the new income tax regimes.
First-time home buyers
The central government has extended the date of additional tax benefit for first-time home buyers who purchase a house priced up to Rs 45 lakh till March 31, 2021.
The buyer will also be able to claim additional tax exemption of Rs 1.5 lakh on interest. This is in addition to the existing Rs 2 lakh exemption buyers can seek.
Startup employees benefit from the new tax regime from today since it allows deferment of tax payment on shares allotted to them under the employee stock ownership plan (ESOP). So far, ESOPs were taxable when vested options are exercised by the employees.
PSU BANK MERGERS
Apart from the changes in the tax regime, the new financial year 2020-21 also marks the merger and amalgamation of 10 public sector banks into four major entities.
With effect from today, Oriental Bank of Commerce (OBC) and United Bank of India will be merged into Punjab National Bank (PNB). Apart from them, Syndicate Bank is merged into Canara Bank and Allahabad Bank has been merged into Indian Bank. These apart, Andhra Bank and Corporation Bank stand merged into Union Bank of India.