income tax slabs

Income tax is levied on the income earned by all the individuals, HUF, partnership firms, LLPs, and Corporates as per the Income-tax Act of India. In the case of individuals, tax is levied as per the slab system if their annual income is above the minimum exemption limit. Income Tax Slabs in India are announced by the finance minister every year. Currently, there are two different Income Tax regimes. Under the new regime, tax benefits cannot be availed. Under the old regime, taxpayers can avail of tax benefits.

 

What is the income tax slab?

In India, where individuals earn an income within a diverse range, levying a tax on all individuals at a specific rate would not be a fair policy. The Act, therefore, segregates income ranges and levies tax at different rates as per the segregation. These groups are thus known as tax slabs.

The slab system was introduced in order to maintain a fair tax system in the country. The slabs tend to change at every budget announcement.

These slab rates are different for different categories of taxpayers. Income tax has classified three categories of “individual taxpayers such as:

  • Individuals (aged less than 60 years) including residents and non-residents
  • Resident Senior citizens (60 to 80 years of age)
  • Resident Super senior citizens (aged more than 80 years)

 

Income Tax Slab Rates for FY 20-21 (AY 2021-22 )

Income Tax Rate for New Tax regime -FY 2020-21

In this new regime, taxpayers have the OPTION to choose either :

  1. To pay income tax at lower rates as per New Tax regime on the condition that they forgo certain permissible exemptions and deductions available under income tax, Or
  2. To continue to pay taxes under the existing tax rates. The assessee can avail of rebates and exemptions by staying in the old regime and paying tax at the existing higher rate.

Income tax slab rate applicable for New Tax regime – FY 2020-21.

Income Tax Slab and RatesNOTE:

 

New tax regime slab rates are not differentiated based on age group. However, under the old tax regime, the basic income threshold exempt from tax for senior citizens (aged 60 to 80 years) and super senior citizens (aged above 80 years) is ₹ 3 lakh and ₹ 5 lakh respectively.

However, under the new tax regime person cannot claim up to 70 income tax deductions while calculating taxes. Hence, every person has to make his/her own calculation as per old and new tax regime and calculate which one is beneficial based on the type of investments made and returns earned on those investments.

 

  • Rebate of up to rs 12500 is available under section 87 A under both tax regime. Thus no income tax is payable for total taxable income up to Rs 5 lakh in both regime.
  • Additional Health and Education cess at the rate of 4 % are applicable on the income tax amount. (increased from 3% since FY 18-19)
  • Surcharge applicable as per tax rates below in all categories mentioned above:
  1. 10% of Income tax if total income > Rs.50 lakh
  2. 15% of Income tax if total income > Rs.1 crore
  3. 25% of Income tax if total income > Rs.2 crore
  4. 37% of Income tax if total income > Rs.5 crore
  5. Income tax slabs rate for Old Tax regime -FY 2020-21

 

Income Tax Rate for Old Tax regime -FY 2020-21

Given below are the three tables for the alternative Income Tax Slabs:

 

Income tax slabs for Individuals aged below 60 years & HUF

Income Tax Slab and Rates

Income Tax Slab for Individuals aged between 60-80 years (Senior Citizen)

Income Tax Slab and Rates

Income Tax Slabs for individuals above 80 years (super senior citizen)

Income Tax Slab and Rates

NOTE:

  • Income tax exemption limit is up to Rs.2,50,000 for Individuals, HUF below 60 years aged and NRIs for FY 2018-19
  • An additional 4% Health & education cess will be applicable on the tax amount calculated as above.
  • Surcharge:
  1. 10% of income tax, where total income exceeds Rs.50 lakh up to Rs.1 crore.
  2. 15% of income tax, where the total income exceeds Rs.1 crore.

 

Conditions for opting New Tax regime

The taxpayer opting for concessional rates in the New Tax regime will have to forgo certain exemptions and deductions available in the existing old tax regime. In all there are 70 deductions & exemptions that are not allowed, out of which the most commonly used are listed below:

List of common Exemptions and deductions “ not allowed” under New Tax rate regime

  1. Leave Travel Allowance (LTA)
  2. House Rent Allowance (HRA)
  3. Conveyance allowance
  4. Daily expenses in the course of employment
  5. Relocation allowance
  6. Helper allowance
  7. Children education allowance
  8. Other special allowances [Section 10(14)]
  9. Standard deduction on salary
  10. Professional tax
  11. Interest on housing loan (Section 24)
  12. Deduction under Chapter VI-A deduction (80C,80D, 80E, and so on) (Except Section 80CCD(2))

List of deductions “allowed” under new Tax rate regime

  1. Transport allowance for specially-abled people
  2. Conveyance allowance for expenditure incurred for traveling to work
  3. Investment in Notified Pension Scheme under section 80CCD(2)
  4. Deduction for employment of new employees under section 80JJAA
  5. Depreciation u/s 32 of the Income-tax act except for additional depreciation.
  6. Any allowance for traveling for employment or on transfer

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