Income tax rates and slabs undergo modification and change every year with the change and addition in the Union Budgets. This year as well, the Indian Finance Minister Nirmala Sitharaman announced multiple changes that have taken place in the Budget.
Given below are the various tables for the latest Income Tax Slabs for the FY 2020-2021:
New Income Tax Slab for Individual (New Regime)
|Income Tax Slab||Tax Rate|
|Up to Rs.2.5 lakh||Nil|
|From Rs.2,50,001 to Rs.5,00,000||5% of the total income that is more than Rs.2.5 lakh + 4% cess|
|From Rs.5,00,001 to Rs.7,50,000||10% of the total income that is more than Rs.5 lakh + 4% cess|
|From Rs.7,50,001 to Rs.10,00,000||15% of the total income that is more than Rs.7.5 lakh + 4% cess|
|From Rs.10,00,001 to Rs.12,50,000||20% of the total income that is more than Rs.10 lakh + 4% cess|
|From Rs.12,50,001 to Rs.15,00,000||25% of the total income that is more than Rs.12.5 lakh + 4% cess|
|Income above Rs.15,00,001||30% of the total income that is more than Rs.15 lakh + 4% cess|
Note: New income tax rates are optional
For more information Check out How to Calculate Taxable Income on Salary
Income tax is a major source of revenue for governments around the world, and the Indian government is no exception. Income taxes, by definition, are collected on income from various sources that an individual may earn during a fiscal year. In India, Income Tax is controlled by the Central Board of Direct Taxes (CBDT), which in turn falls under the Indian Revenue Services (IRS). IRS is the administrative services arm of the Department of Revenue, Ministry of Finance.
- Update from Feb 2020: Checkout: Income Tax Slabs and Rates for FY: 2020-21
Who has to pay income tax?
Income tax is collected on a yearly basis as a percentage of an entity income in a fiscal year. The maximum rate of income tax is capped at 30% in India, though surcharge and educational cess are also applicable, which may increase this upper limit by some percentage. Taxpayers are broadly categorized into:
Individuals and Hindu Unified Families (HUF) entities:
- Individuals (both male and female) up to the age of 60 years.
- Senior citizens above 60 years and up to 80 years of age.
- Super senior citizens above 80 years old.
- Domestic company, firms and local authority.
- Co-operative societies.
- Foreign companies.
Income Tax Rates are levied according to the divisions given above. For the first category of individual taxpayers, the tax slabs and rates are applicable as per following.
Income Tax Slabs and Rates
Individual Taxpayers: Learn more: How to Calculate TDS from Salary
For HUF and individuals (less than 60 years old):
Tax Slabs Tax Rates Income up to Rs.2.5 lakhs Nil Income between Rs.2.5 lakhs and Rs.5 lakhs 10% of amount exceeding Rs.2.5 lakhs Income between Rs.5 lakhs to Rs.10 lakhs 20% of amount exceeding Rs.5 lakhs Income above Rs.10 lakhs 30% of amount exceeding Rs.10 lakhs
Senior citizens (individuals over 60 years old):
Tax Slabs Tax Rates Income up to Rs.3 lakhs NIL Income between Rs.3 lakhs and Rs.5 lakhs 10% of amount exceeding Rs.3 lakhs Income between Rs.5 lakhs to Rs.10 lakhs 20% of amount exceeding Rs.5 lakhs Income above Rs.10 lakhs 30% of amount exceeding Rs.10 lakhs
Super senior citizens (individuals over 80 years old):
Tax Slabs Tax Rates Income up to Rs.5 lakhs NIL Income between Rs.5 lakhs to Rs.10 lakhs 20% of amount exceeding Rs.5 lakhs Income above Rs.10 lakhs 30% of amount exceeding Rs.10 lakhs
- A point to note here is that if an individual touches the age of 60 or 80 during a fiscal year, then his/her income is taxable under the senior citizen/super senior citizen category for the whole fiscal, whichever is applicable.
- Surcharge is applicable at 10% of income above Rs.1 crore in a fiscal year.
- Educational cess is levied as 2% and SHEC (secondary and higher secondary education cess) is levied at 1%.
For the second category of taxpayers, namely business entities, the following tax rates and slabs are applicable.
|Tax Slabs||Tax Rates|
|Income up to Rs.10,000||10% of income|
|Income between Rs.10,000 to Rs.20,000||20% of amount exceeding Rs.10,000|
|Income above Rs.20,000||30% of amount exceeding Rs.20,000|
Domestic Company, Firms and Local Authority:
This category of tax payers arent levied taxes on the basis of income brackets but rather as a collective percentage of overall earnings. Taxes are collected as flat 30% of overall declared income.
Foreign companies are required to pay taxes at 40% of overall operating income out of India.
- Educational cess is levied at 2%, while SHEC is levied at 1% of taxable income.
- Surcharge is collected at 10% of income exceeding Rs.1 crore.
- Domestic companies have to pay 5% surcharge on income exceeding Rs.1 crore but less than Rs.10 crores. 10% surcharge is levied on domestic companies on income above Rs.10 crores.
All the data listed above is for the FY 2020-21 and AY 2021-22. FY denotes fiscal year and lasts from April to March, while AY stands for assessment year which denotes the year you actually pay your previous years taxes in. For instance FY 2020-21 has just ended and you are required to pay taxes for this FY in AY 2021-22.
TDS, or Tax Deducted at Source, is a type of Direct Tax levied by the government wherein taxes are deducted at the source of payments. For instance, the salary you receive from your employer will be released every month only after deducting the applicable TDS on the amount. As such, it becomes important to report your income for the coming fiscal to the respective tax authorities.
However, if you have wrongly paid taxes during a fiscal, you can claim refunds from the IT department for the excess funds. You have to ensure that your tax filings are in order so that you can spot excess deductions, if any. Also, make it a habit to report all your incomes and expenditures to the best of your knowledge to the tax authorities. False or withheld information can potentially cause you to pay heavy penalties as well as other legal issues.