IT Slabs (AY 2021-22)
In India, income tax is levied on individual taxpayers on the basis of a slab system where different tax rates have been prescribed for different slabs and such tax rates keep increasing with an increase in the income slab.
Existing tax regime vis-à-vis new tax regime:
There are three categories of individual taxpayers:
There are different slabs for each category of taxpayers. The income tax slabs for AY 2021-22 onwards are given below. Such tax slabs tend to undergo a change during every budget.
Income Tax Slabs for Resident Individuals
For an Indian Resident Income Tax Slabs has been categorised according to the age and income level. For Indian residents below 60 years of age, Income tax slabs range from Nil to 30%. Below mentioned are Income Tax Slabs for the year 2020-2021 onwards.
Tax Slab for Individuals below 60 Years of Age
Cess at 4% of tax applicable in all cases. Surcharge at 10% for income above Rs. 50 Lakh and at 15% for income above Rs. 1 Cr.
A rebate of Rs. 12,500 is available under the old income tax regime, whereas the same rebate is available in the new income tax regime if the annual taxable income does not exceed Rs. 5 Lakh.
The total reduction in tax liability will range from Rs. 25,000 for a person earning Rs. 7.50 Lakh per annum to Rs. 75,000 for a person earning Rs. 15 Lakh or more per annum under the new tax slabs. However, the actual savings will be lower if one were to include the impact of fore-going exemptions under the new tax regime.
Income Tax Slab for Senior Citizens (age more than 60 years but less than 80 years FY 2019-20)
Cess at 4% of tax applicable in all cases. Surcharge at 10% for income above Rs. 50 Lakh and at 15% for income above Rs. 1 Cr
The rebate of Rs. 12,500 is applicable for all income under the old income tax regime. Whereas, it is available only for the income up to Rs. 5 Lakh under the new income tax regime.
Senior Citizens Tax Slab (age more than 80 years FY 2019-20)
Income Tax Slabs for Other Entities
For other entities such as firms and domestic companies, Income Tax Slabs have been categorised based on their annual turnover as mentioned below.
New Income Tax Slab for Firms and Domestic Companies FY 2019-20
· 10% of tax in case income is more than Rs. 10 Cr.
The above table highlights the latest tax slabs for the firms and domestic companies. The tax treatment in both the cases differs from the tax treatment of individuals and HUFs.
Key Takeaways while opting New Tax Regime
Under the Union Budget 2020, the individuals are offered a choice between the old and new tax regime to calculate their income tax liability. If an individual opts to go with the old regime, they can avail of the applicable exemptions and deductions, whereas in case of the new tax regime most of the commonly used deductions and exemptions are not available.