April 1, 2020 marked the onset of a new financial year. It also brought into action the new tax changes as proposed in the Budget 2020.
Let’s look at the 5 key changes that you need to be aware of as well as plan for.
#1 Are you salaried? Time to make your tax slab choice now
As you are aware, Budget 2020 provided for a new set of tax slabs with a choice provided to individuals to opt for the old or the new slabs.
Companies have already started asking employees their preferred tax slab so as to calculate the TDS accordingly. Some of them are also showing comparisons based on actual salary to help make the decisions.
If you are still wondering, which slab to go for, use our nifty calculator. Know more here.
#2 More than Rs. 7.5 lakh contribution to EPF, NPS by your employer is taxable
Some employees, specially with higher pay packages have salary structures where they can maximise employer contributions to NPS, EPF and Superannuations, thus reducing their tax liability. From this financial year 2020-21, any employer contributions over Rs. 7.5 lakhs in a financial year will be taxable in the hands of employees at their marginal tax rate.
Any interest earned on such excess contributions will also be taxable.
#3 Dividends from stocks, mutual funds or REITs are now taxable in your hands
Till the previous financial year, any dividends received were subject to Dividend Distribution Tax or DDT. From FY 2020-21, the DDT has been removed. Dividends will now be taxable in the hands of individuals at the marginal tax rate.
Note: Dividends over Rs. 5000 in a single financial year are subject to 10% TDS.
This benefits several retail investors who fall in the lower tax brackets. But for those in the highest tax brackets, be ready to pay a higher rate of tax. Who knows, you may even be pushed in to a higher tax bracket, courtesy the dividends.
Read More: Budget 2020: It’s the taxes, stupid!
#4 If you are an NRI with no tax jurisdiction, your worldwide income may be taxable in India
The revised provision states that if you have stayed in India for 120 days or less (earlier 182 days or less) and you don’t pay taxes anywhere else in the world, your worldwide income will be subject to tax in India.
#5 The deadline for tax saving investments pertaining to FY 19-20
If for any reason, you were not able to make your tax saving investments for the FY 2019-20, you have time till June 30, 2020 to complete them.
This includes contribution to NPS, PPF, tax saving MFs or Bank FDs, insurance payments, etc.
If you had capital gains, you can also buy REC or NHAI bonds till the revised deadline and reduce your tax outgo for the previous financial year.