Income Tax Slabs in India is announced by the Union Finance Minister. At present, there are 2 different regimes for Income Tax Slabs. Under the old regime, taxpayers will be able to enjoy the benefits of deductions and exemptions while the tax slabs are divided into 4 categories ranging from Nil to 30%. However, under the new regime, taxpayers cannot avail the benefits of deductions and exemptions, but the tax slabs are further divided into 7 categories ranging from Nil to 30%.
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What is the Income Tax Slab?
In India, it would be unfair to levy the same tax on every individual as each of them would earn differently from each other. In order to maintain fairness and ensure that eligible individuals are able to pay their tax while taking care of their day-to-day financial needs, a tax slab helps in deciding the tax a person or an entity will pay based on their annual income.
The tax slab is however subject to change and is revised every year during the budget session held by the Central Government.
Read about the Union Budget 2021 Highlights:
Income Tax Slabs remain Unchanged
There was no change in income tax slabs for individuals as no announcement was made by the Finance Minister Nirmala Sitharaman during the Union Budget 2021. Senior Citizens aged 75 years and above were however exempted from filing income tax if their only source of income was through pension.
Income Tax Slabs for the FY 2020-21
Given below are the various tables for the New Income Tax Slabs and rates for the FY 2020-2021 and AY 2021-22 Which was announced in Union Budget 2020.
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.5,00,001Â 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
Things you must keep in mind before opting for the New Tax Slab
There are few things you must keep in mind before opting for the new tax slab:
- The option can be exercised on or before for every previous year if you as an individual or as a member of a Hindu Undivided Family (HUF) do not have any business income.
- As a taxpayer once you choose the next tax regime as your option, you cannot change it during the year. In case you withdraw your option for the next tax regime and revert back to the old tax regime, you can opt for the new tax regime again during the financial year again.
Given below is an example of how income tax is calculated under the new regime (optional):
| Components | A | B | C | D | E | F |
|---|---|---|---|---|---|---|
| Annual Salary (Rs.) | 2.5 lakh | 5 lakh | 7.5 lakh | 10 lakh | 12.5 lakh | 15 lakh |
| Computation of tax on the gross total income | ||||||
| Up to Rs.2.5 lakh | Nil | Nil | Nil | Nil | Nil | Nil |
| From Rs.2,50,001 to Rs. 5 lakh | Nil | 12,500 | 12,500 | 12,500 | 12,500 | 12,500 |
| From Rs.5,00,001 to Rs.7.5 lakh | Nil | - | 25,000 | 25,000 | 25,000 | 25,000 |
| From Rs.7,50,001 to Rs.10 lakh | Nil | - | - | 37,500 | 37,500 | 37,500 |
| From Rs.10,00,001 to Rs.12.5 lakh | Nil | - | - | - | 50,000 | 50,000 |
| From Rs.12,50,001 to Rs.15 lakh | Nil | - | - | - | - | 62,500 |
| Above Rs.15 lakh | Nil | - | - | - | - | - |
| Total Tax Amount | Nil | 12,500 | 37,500 | 75,000 | 1,25,000 | 1,87,500 |
| Additional Cess (4%) | Nil | 500 | 1,500 | 3,000 | 5,000 | 7,500 |
| Total payable tax amount | Nil | 13,000 | 39,000 | 78,000 | 1,30,000 | 1,95,000 |
Note: The calculation in this table is based on the new optional tax regime which has been announced on 1 February 2020.
Given below are the three tables for the alternative Income Tax Slabs:
1. Income Tax Slab for Individual who are below 60 years
| 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.10,00,000 | 20% of the total income that is more than Rs.5 lakh + Rs.12,500 + 4% cess |
| Income of above Rs.10 lakh | 30% of the total income that is more than Rs.10 lakh + Rs.1,12,500 + 4% cess |
Individuals who have an income of less than Rs.5 lakh are eligible for tax deductions under Section 87A
Given below is an example of how income tax is calculated for 3 individuals (A, B, and C):| Components | A | B | C |
|---|---|---|---|
| Annual Salary (Rs.) | 5,00,000 | 10,00,000 | 15,00,000 |
| Standard Deduction (Rs.) | 50,000 | 50,000 | 50,000 |
| Tax deductions under Section 80C of the Income Tax Act (Rs.) | 70,000 | 1,50,000 | 1,50,000 |
| House Rent Allowance deductions | 82,000 | 90,000 | 1,40,000 |
| Gross total income after deductions (Rs.) | 2,88,000 | 7,00,000 | 11,50,000 |
| Computation of tax on the gross total income | |||
| Up to Rs.2.5 lakh (Rs.) | Nil | Nil | Nil |
| From Rs.2,50,001 to Rs.5 lakh (Rs.) | 1,900 | 12,500 | 12,500 |
| From Rs,5,00,001 to Rs.10 lakh (Rs.) | 40,000 | 1,00,000 | |
| Above Rs.10 lakh (Rs.) | 45,000 | ||
| Total Tax (Rs.) | 1,900 | 52,500 | 1,57,500 |
| Deductions under Section 87A (Rs.) | 1,900 | Nil | Nil |
| Additions of cess (Rs.) | Nil | 2,100 | 6,300 |
| Total tax that is payable (Rs.) (Total Tax + cess – Deductions under Section 87A) | Nil | 54,600 | 1,63,800 |
2. Income Tax Slab between 60-80 years (Senior Citizen)
| Income Tax slabs | Tax Rate |
|---|---|
| Up to Rs.3 lakh | Nil |
| From Rs.3,00,001 to Rs.5,00,000 | 5% of the total income that is more than Rs.3 lakh + 4% cess |
| From Rs.5,00,001 to Rs.10,00,000 | 20% of the total income that is more than Rs.5 lakh + Rs.10,500 + 4% cess |
| Income of above Rs.10 lakh | 30% of the total income that is more than Rs.10 lakh + Rs.1,10,000 + 4% cess |
| Components | A | B | C |
|---|---|---|---|
| Annual Salary (Rs.) | 5,00,000 | 10,00,000 | 15,00,000 |
| Standard deduction (Rs.) | 50,000 | 50,000 | 50,000 |
| Tax deductions under Section 80C of the Income Tax Act (Rs.) | 70,000 | 1,50,000 | 1,50,000 |
| House Rent Allowance deductions | 82,000 | 90,000 | 1,40,000 |
| Gross total income after deductions (Rs.) | 2,88,000 | 7,00,000 | 11,50,000 |
| Computation of tax on the gross total income | |||
| Up to Rs.3 lakh (Rs.) | Nil | Nil | Nil |
| From Rs.3,00,001 to Rs.5 lakh (Rs.) | Nil | 10,500 | 10,500 |
| From Rs,5,00,001 to Rs.10 lakh (Rs.) | 40,000 | 99,500 | |
| Above Rs.10 lakh (Rs.) | 45,000 | ||
| Total Tax (Rs.) | Nil | 50,500 | 1,55,000 |
| Deductions under Section 87A (Rs.) | Nil | Nil | Nil |
| Additions of cess (Rs.) | Nil | 2,020 | 6,200 |
| Total tax that is payable (Rs.) | Nil | 52,520 | 1,61,200 |
3. Income Tax Slabs for individual above 80 years (super senior citizen)
| Income Tax slabs | Tax Rate |
|---|---|
| Up to Rs.5 lakh | Nil |
| From Rs.5,00,001 to Rs.10,00,000 | 20% of the total income that is more than Rs.5 lakh + 4% cess |
| Above Rs.10 lakh | 30% of the total income that is more than Rs.10 lakh + Rs.1,00,000 + 4% cess |
| Components | A | B | C |
|---|---|---|---|
| Annual Salary (Rs.) | 5,00,000 | 10,00,000 | 15,00,000 |
| Standard deduction (Rs.) | 50,000 | 50,000 | 50,000 |
| Tax deductions under Section 80C of the Income Tax Act (Rs.) | 70,000 | 1,50,000 | 1,50,000 |
| House Rent Allowance deductions | 82,000 | 90,000 | 1,40,000 |
| Gross total income after deductions (Rs.) | 2,88,000 | 7,00,000 | 11,50,000 |
| Computation of tax on the gross total income | |||
| Up to Rs.5 lakh (Rs.) | Nil | Nil | Nil |
| From Rs,5,00,001 to Rs.10 lakh (Rs.) | 40,000 | 1,00,000 | |
| Above Rs.10 lakh (Rs.) | 45,000 | ||
| Total Tax (Rs.) | Nil | 40,000 | 1,45,000 |
| Deductions under Section 87A (Rs.) | Nil | Nil | Nil |
| Additions of cess (Rs.) | Nil | 1,600 | 5,800 |
| Total tax that is payable (Rs.) | Nil | 41,600 | 1,50,800 |
For domestic companies, the tax-slabs depend on the turnover, and it is mentioned below:
| Turnover | Tax Rate |
|---|---|
| Gross turnover can be a maximum of Rs.250 crore for the previous year | 25% |
| Gross turnover is more than Rs.250 for the previous year | 30% |
- Cess: 4% of corporate tax
- Surcharge: In case the taxable income is more than Rs.1 crore but less than Rs.10 crore, the surcharge that will be levied is 7%. In case the taxable income is more than Rs.10 crore, the surcharge that will be levied is 12%.
- Non-resident Indians: For non-resident Indians, irrespective of their age, the exemption limit is up to Rs.2.5 lakh.
- In case your net income is more than Rs.50 lakh but less than Rs.1 crore, apart from a 4% cess, a 10% surcharge is also levied. If the net is above Rs.1 crore, a 15% surcharge is levied.
- Compared to last year’s budget, cess has increased from 3% to 4%.
FAQ's on Income Tax Slabs
- Do I need to file Income Tax Return (ITR) if my annual income is below Rs.2.5 lakh?
- How is the income of a taxpayer classified?
- Does family pension come under salary income during taxation?
- Who can claim rebate under Section 87A?
- Will my income be taxed if I am an agriculturist?
You need not file an ITR if your yearly income is below Rs.2.5 lakh but you should file a ‘Nil Return’ just for the record as there are many cases where you can produce them as proof of your employment. For instance, you can provide your ITR while applying for a loan or passport.
Under Section 14 of the Income Tax Act, the taxpayer’s income has been classified under 5 different income heads such as Salaries individuals, Capital gains, Gains/Profits from profession or business, Income from house property, Income from other sources.
No, family pension will not be taxed under salary income but as ‘income from other sources.’
Rebate under Section 87A can be claimed by any resident Indian whose total annual income is below Rs.5 lakh. The maximum available rebate under 87A is Rs.12,500.
Any income which is generated from agriculture or its allied activities will not be taxed. However, it will be considered for rate purpose while calculating tax on any non-agricultural income that you may have.
