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 April 2016: Checkout: Income Tax Slabs and Rates for AY: 2016-17
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 (April to March). 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 2014-15 and AY 2015-16. Same slabs and rates are expected for FY 2015-16 and AY 2016-17. 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 2014-15 has just ended and you are required to pay taxes for this FY in AY 2015-16.
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.
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News About Income Tax Slabs and Rates
Assam Tea Industry Urges Centre To Keep GST Slab Under 5%
Representatives of Assamâ€™s tea industry have launched an appeal to the Centre in hopes of convincing them to maintain the GST slab of tea below the concessional rate of 5 per cent. A joint forum consisting of representatives from the Assam Tea Planters' Association (ATPA), North Eastern Tea Association (NETA), Bharatiya Cha Parishad (BCP) and Tea Board of India (TBI) vice-chairman Bidyananda Barkakoty stated on Tuesday that if a higher taxation rate on tea was maintained by the Centre, it would result in a negative impact on the tea industry. The joint forum also said that tea should be grouped in the same category as flour, pulses and salt, when it comes to taxation rates, since they all represent high consumption products. The forum point out that since tea is an agricultural produce, Income Tax guidelines mentions that 60% of any income obtained from the growing or production of tea will be treated as agricultural income. As tea is a high labour-intensive crop, it absorbs between 60 per cent to 70 per cent of its total cost.
With Income Tax Slabs unchanged and its effect on TaxPayers
The Income Tax slabs were not changed in this yearâ€™s Union Budget. This has lead to a lot of disappointment among the salaried class. Even the bank re-capitalisation amount that has been set aside has caused disappointment. The main points that have helped the salaried class has been, the rationalisation of TDS, powers of the Assessing officers being reduced, presumptive tax limit increased from Rs. 1 crore to Rs. 2 crore.
Would you prefer higher IT Slabs or Exemptions on Interest Earned?
For the Union Budget of 2016-17 the Finance Minister has received more that 2,800 suggestions from the public to restructure income tax slabs, consider to make interest earned on fixed deposits exempt, provide higher allocations towards education and job creation. Some of them even requested for higher tax exemptions for senior citizens as well. Small savings scheme are in focus as well, wherein , many citizens have asked for higher investment limit under Section 80C of the Income Tax Act. A increase in medical reimbursement limit of Rs. 15,000 is also a popular choice. Abolishing service tax completely has been the ask of many people, if not completely some have requested the abolishing of service tax at least on utilities bills and insurance premiums.
No Subsidised LPG for Consumers with Annual Income over Rs.10 lakh
The government announced that taxpayers with an annual income tax slab of more than Rs.10 lakh will no longer get subsidised LPG(cooking gas) from this month. The government came up with the decision to limit supply of under priced fuel to cut subsidies. All households were entitled to 12 cylinders of 14.2 kilograms at a subsidised rate of Rs.419.26 while the market price was actually Rs.608. Earlier in 2015, the government had asked people who are better off financially to give up their subsidies LPG and but cooking gas at the market price but not many paid heed to it. Hence the government has made a rule where in LPG subsidy will not be available to any consumer who earns more than Rs.10 lakh.
Narayana Murthy Urges Increase in Income Tax Slab
The founder of Infosys, Narayana Murthy, recently stated that the present personal tax slab must be raised by at least 10% in order to open up funds for basic amenities such as infrastructure, health and education. He said that it was good that Indiaâ€™s tax rates are 31-34% but intends on improving the same if the government decides tax on company dividends, adding that our country is one of the few tax payer friendly nations.
Mr Murthy wishes to raise the slab from the present 30% to 40% and has shared his thoughts with several finance ministers including Pranab Mukherji, who said that the idea was good and that it shall soon be implemented.