Budget 2021-22 will be presented on February 1 by Finance Minister Nirmala Sitharaman, which will be the third budget of the Modi 2.0 government.

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But before we get ready for Budget 2021, let's take a look at how Budget 2020 changed our personal finances:

New tax regime

Finance Minister Nirmala Sitharaman introduced a new tax structure in Union Budget 2020. The budget offered an individual the choice of paying tax under the new structure with lower rates but foregoing deductions or continue paying tax under the existing tax laws and claim the applicable exemptions.

According to the proposal, if the total income of an individual falls in the bracket of Rs 5 lakh- Rs 7.5 lakh, 10 percent tax is payable. For individuals earning Rs 7.5 lakh to Rs 10 lakh, tax is deducted at the rate of 15 percent.

For individuals earning between Rs 10 lakh to Rs 12.5 lakh, the tax rate payable is 20 percent. For Income between Rs 12.5 lakh to Rs 15 lakh, the tax rate is 25 percent.

On the other hand, for the income above Rs 15 lakh, the income tax rate is payable at 30 percent.

The new income tax rates do not allow exemptions under Section 80C. Home loan exemption, insurance exemptions, standard deduction also do not qualify under the regime.

Tax on employer's contribution to PF, NPS in excess of Rs 7.5 lakh

The government, in Budget 2020, introduced tax on any amount contributed towards employees’ provident fund, National Pension System (NPS) and superannuation fund by employers, in excess of Rs 7.5 lakh.

Further, the government said that any annual accretion by way of interest, dividend, etc. credited towards these contributions will be treated as a prerequisite to the extent it relates to the employer’s contribution.

Affordable housing

The government extended the additional tax deduction period of Rs 1.5 lakh as interest paid on housing loans sanctioned for the purchase of an affordable home to March 31, 2021.

Taxation on ESOPs

The taxation on ESOPs for employees was deferred from the time of exercise to up to five years or till they leave the company or when they sell their shares, whichever is earlier.

First Published:Jan 12, 2021 7:19 AM IST