New tax slab introduced by Income Tax Department to claim exemption
A new tax slab has been introduced by the Government in the Rights To Responsibility Act. Which offers lower tax rates, that can be claimed as exemption on conveyance allowance received from your employer.
A new tax slab has been introduced by the Government in the Rights To Responsibility Act. Which offers lower tax rates, that can be claimed as an exemption on conveyance allowance received from your employer.
Tax Returns On Exemption
Furthermore, the Central Board of Direct Taxes (CBDT) has issued a notification. The new tax slab that has just been introduced has following vantages. Firstly that amending rules to allow taxpayers who are opting for the new tax regime. To claim exemption on the following. For allowance to meet the cost of travel and daily expenses on transfer, tour allowance for travel for official purposes. Secondly, it will meet the travel and daily expenses, and conveyance allowance. Which is for meeting conveyance expenditure incurred in the course of performing official duties. Besides, transport allowance for handicapped employee to commute to and from office is also tax-exempt.
“The notification has rightly exempted allowances in the nature of tour, transfer or conveyance for official purposes. Since these are essentially incurred by employees and not for their personal benefit. But for discharging their official duties. Therefore expecting employees to pay tax on such amounts even under the new scheme would have been unreasonable.” Taxation Expert Shailesh Kumar, Partner, Nangia & Co LLP, stated.
However, the new rules also considers free meal or beverages. These shall be provided by an employer to employees during office hours. Through paid voucher to be a personal benefit to employees and not an expenditure for official purposes. Therefore, tax exemption of such free meals or beverages has been withdrawn under the new income tax scheme.
“More Than Just The Conveyance Fee”- Kumar
“This notification also apparently clarifies. That except free meals/ beverages/ meal coupons, tax treatment of other perquisites. Which are specified under Rule 3, such as rent free accommodation, motor cars, free/ concessional education facility, telephone, concessional loan, gifts, club membership, etc. Provided by the employer will remain the same. Both under old scheme as well as under new scheme.” Kumar said.
Henceforth, the new rules shall commence into force from assessment year 2021-22. Which shall be offering an optional lower rate of income tax. Individuals willing to forego certain specified deductions or exemptions. Also while computing total income for tax purpose. Will be able to benefit fully. The finance ministry has introduced two income tax slabs. Under the new income tax slab which has a lower tax rate. Inclusive of an annual income up to ₹2.5 Lakh is exempt from tax. Individuals earning between ₹2.5 Lakh and ₹5 Lakh will pay 5% tax. Income earners between ₹5 and 7.5 Lakh will be taxed at 10%. While those between ₹7.5 and 10 Lakh at 15%.
But those that earn between ₹10 and 12.5 Lakh will pay tax at the rate of 20%. However while those between ₹12.5 and ₹15 Lakh will pay at the rate of 25%. Although, Income above ₹15 Lakh will be taxed at 30%. These new regimes are said to be extremely competitive given their low tax rates in the COVID-19 Pandemic. Especially when people are finding it difficult to contract wages.