Tax benefits from Budget 2020?

In Union Budget 2020, Finance minister proposed an ‘optional’ alternate tax regime for providing tax benefits. This is Section 115BAC of the income tax act -> https://www.indiabudget.gov.in/doc/memo.pdf

Below is a calculation of tax savings with alternate rates for an individual taxpayer below 60 years age. 

Income slab	Existing tax	Alternate tax	Tax saved
0 – 2.5 lakh	0	0	0
2.5 – 5 lakh	5%	5%	0
5 – 7.5 lakh	20%	10%	25,000
7.5 – 10 lakh	20%	15%	12,500
10 – 12.5 lakh	30%	20%	25,000
12.5 – 15 lakh	30%	25%	12,500
15 lakh +	30%	30%	0
Total tax saving	–	–	75,000

After adding the 4% cess(Rs 3,000), the total tax saved would be Rs. 78,000 if income is Rs 15 lakhs or above. 

Real tax benefits with new slabs?

The new tab slabs are optional and a taxpayer can continue to avail the existing slabs. If a taxpayer wants to avail the new slabs, she/he would have to forgo deductions and exemptions. Majority of taxpayers avail the below deductions to minimize their tax liabilities:-

• Leave travel allowance. 
• House rent allowance 
• Standard deduction(Rs. 50,000)
• Deduction on home loan interest payment
• Any deduction under section 80C(upto Rs. 1,50,000)
• Deduction under section 80D(Rs 25,000-50,000)

In my post about tax benefits from budget 2019, I calculated that a person earning Rs 13 lakhs can have 0(zero) tax liability by availing major deductions.  Now, without these deductions, the tax liability would be around Rs. 1,43,000 per year. Doesn’t look like a benefit to me.

Conclusion(my opinion)

1. The new slabs don’t provide any real tax benefits without the deductions and exemptions.
2. New slabs may discourage investments if taxpayers don’t see advantage of tax exemptions in instruments like PPF, EPF, tax saving FDs, ELSS etc. 
3. As medical and health insurance premiums(u/s 80D) can’t be availed as deductions, it may reduce one’s preparedness for medical emergencies. 
4. We will continue with the existing tax slabs and minimize our tax liability by investing in instruments that provide real tax benefits via deductions under various sections. 

What are your thoughts on the proposed tax slabs? Would you choose them for next financial year? Please share in the comments section.