What are Income Tax Slabs?
The calculation of income tax in India is executed primarily based on making use of the distinct tax fees to specific annual earnings groups known as slabs. For calculating income tax, first of all, real annual taxable earnings are calculated as in line with the provisions of numerous sections in the Income Tax Act, presenting distinctive earnings inclusions and exclusions for the same.
According to the profits generated through them, the government imposes Income Tax on all earnings generated by people and agencies. These levels of earning are recognized as Income Tax Slabs. According to Income Tax Act 1961, these tax slabs alternate from year to year and are bifurcated consistent with age, earnings level, and gender.
Presently, Income Tax Slabs may be labelled as follows:
- Individuals must pay nil taxes on the profits generated through them.
- An Income Tax slab of 5 % is levied on particular earnings.
- Income is chargeable at 10%, 15%, 20%, 25% and 30% as according to Income Tax Slab 2020.
Tax Slab for Individuals below 60 Years of Age
| Income Range Per Annum | Old Slabs, Mandatory Upto FY 2019-20 | New Slabs For FY 2020-21, AY 2021-22 |
| Up to ₹ 2.50 Lakh | No Tax | No Tax |
| Above ₹ 2.50 Lakh to ₹ 5 Lakh | 5% | 5% |
| Above ₹ 5 Lakh to ₹ 7.50 Lakh | 20% | 10% |
| Above ₹ 7.50 Lakh to ₹ 10 Lakh | 20% | 15% |
| Above ₹ 10 Lakh to ₹ 12.50 Lakh | 30% | 20% |
| Above ₹ 12.50 Lakh to ₹ 15 Lakh | 30% | 25% |
| Above ₹ 15 Lakh | 30% | 30% |
| Rebate under section 87(A) | 100% tax rebate subject to a maximum of ₹2,500 available to a resident individual whose total income does not exceed ₹35 Lakh | 100% tax rebate subject to a maximum of ₹2,500 available to a resident individual whose total income does not exceed ₹3.50 Lakh |
Income Tax Slab for Senior Citizens (age more than 60 years but less than 80 years FY 2019-20)
| Income Range Per Annum | Tax Rate FY 2019-20 | New Slab For FY 2020-21 |
| Up to ₹ 3 Lakh | No Tax | No Tax |
| Above ₹ 3 Lakh to ₹ 5 Lakh | 5% | 5% |
| Above ₹ 5 Lakh to ₹ 7.50 Lakh | 20% | 10% |
| Above ₹ 7.50 Lakh to ₹ 10 Lakh | 20% | 15% |
| Above ₹ 10 Lakh to ₹ 12.50 Lakh | 30% | 20% |
| Above ₹ 12.50 Lakh to ₹ 15 Lakh | 30% | 25% |
| Above ₹ 15 Lakh | 30% | 30% |
| Rebate under section 87(A) | 100% tax rebate subject to a maximum of ₹2,500 available to a resident individual whose total income does not exceed ₹3.50 Lakh | 100% tax rebate subject to a maximum of ₹ 2,500 available to a resident individual whose total income does not exceed ₹ 3.50 Lakh |
Senior Citizens Tax Slab (age more than 80 years FY 2019-20)
| Income Range Per Annum | Tax Rate FY 2019-20 | New Slab For FY 2020-21 |
| Up to ₹ 2.50 Lakh per annum | No Tax | No Tax |
| Up to ₹ 5 Lakh per annum | No Tax | No Tax |
| Above ₹ 5 Lakh to ₹ 7.50 Lakh | 20% | 10% |
| Above ₹ 7.50 Lakh to ₹ 10 Lakh | 20% | 15% |
| Above ₹ 10 Lakh to ₹ 12.50 Lakh | 30% | 20% |
| Above ₹ 12.50 Lakh to ₹ 15 Lakh | 30% | 25% |
| Above ₹ 15 Lakh | 30% | 30% |
New Income Tax Slab for Firms and Domestic Companies FY 2019-20
| Tax Head | Firms | Domestic Companies |
|---|---|---|
| Income Tax for turnover up to ₹ 400 Cr | 30% | 25% |
| Income Tax for turnover above ₹ 400 Cr | 30% | 30% |
| A surcharge as % of income tax | 12% of tax in case the total income exceeds ₹ 1 Cr |
|
| Cess as % of tax and surcharge | 3% of tax plus surcharge | 3% of tax plus surcharge |
Important Things to Remember while opting New Tax Regime
Under the Union Budget 2020, the people prefer the old and new tax regime to calculate their income tax liability. If a person opts to go along with the old regime, they can avail the relevant exemptions and deductions. In contrast, in the brand new tax regime, 70 of the generally used deductions and exemptions aren’t available.
Should you choose a brand new tax regime or go along with the old regime?
The elective tax regime presented below the brand new price range is a blended bag of both suitable and bad sides. While it’s far useful for people whose profits fall below the slab up to ₹ 15 Lakh, it could now no longer pass in your favour in case your profits fall above the bracket of ₹ 15 Lakh. The motive for the same is that if you choose a brand new tax regime, you need to forgo 70 exemptions, such as residence lease allowance, health insurance premium, and tour allowance.
Latest Updates of Income Tax Slabs and Rate for 2019-20
Income Tax Act was instituted in 1961 with the factors taken into play that there have been numerous additions and subtractions that have been made to generate changes in the Income Tax Act. Changes in the Income Tax Act have been dynamic. Constant changes in the provisions of the Income Tax Act with each passing Financial Year have been a defining factor in the functioning of the Indian Financial System. As per interim budget 2019, Individual taxpayers having taxable annual income up to ₹ 5 lakh will get full tax rebate u/s 87A and therefore will not be required to pay any income tax. However, Income-tax Slabs and Rates will remain unchanged for the FY 2019-20.
Concept of Surcharge and Cess
Before explaining the Concept of Surcharge and Cess, we must define what both these terms are. Firstly, Surcharge refers to the additional percentage of tax levied on the income-earning individual’s total income taxable. It is generally taxed on the total tax liability and not on the total income. On the other hand, cess is the statutory percentage of money paid on the total tax liability. For example- After paying a surcharge on the tax liability, we pay a Health and Education Cess of 4%. Following are important concepts associated with Surcharge and Cess-
- 10% surcharge is applicable on income tax if income exceeds ₹ 50 lacs but too ₹ 1 crore
- 15% surcharge is applicable on income tax if income exceeds ₹ 1 crore
- 4% Health & Education Cesappliesso toe income tax and applicable surcharge.
- Tax rates and slabs are the same for Male and Females who are there in the above table.
- Individuals having total income below 5 lakh are eligible for full tax rebate under section 87A
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