Individual taxpayers need to pay the tax on the basis of a slab system defined by Income Tax 1961, on the basis of the income earned by them in the previous year. Slab system means different tax rates prescribed for different ranges of income which are progressive in nature; it means the tax rates keep increasing with a increase in the income of the taxpayer. This ensures fair tax systems in the country, the higher the income the higher slab one falls in and vice versa. These slab rates not only depend on the income of the assessee but also on the categories of taxpayers.
Income Tax Rates for individuals
The Income Tax Act, 1961 has classified three categories of “individual taxpayers” which are:
- Individuals including residents (aged less than of 60 years)and non-residents
- Resident Senior citizens (60 to 80 years of age)
- Resident Super senior citizens (aged more than 80 years)
With the intention of making terms simpler, the government have made calculation complex for the assesses. For individuals, we have 2 tax regimes now in process. Basic exemption limit given to NRIs is of Rs 2.5 Lakh irrespective of age.
Old tax regime and the New tax regime
First let us understand the old one-
Income tax old slabs for Individual and HUF
|Income Tax Slab
|Individuals Below The Age Of 60 Years – Income Tax Slabs
|Income tax slab for Individual aged 60-80 years
|Income tax slab for Individual aged more than 80 years
|Up to Rs 2.5 lakhs
|Up to Rs 3 lakhs
|Up to Rs 5 lakhs
|Rs. 2.5 lakh -Rs. 5 Lakhs
|Rs. 3 lakh -Rs. 5 Lakhs
|Rs 5 lakh – Rs 10 lakhs
|More than Rs 10 lakh
NOTE: Income tax exemption limit is up to Rs.2,50,000 for Individuals, HUF and Non- Resident Individuals for FY 2020-21. An additional 4% Health & education cess will be applicable on the tax amount calculated as above.
A. For age below 60 years
Income tax exemption limit is up to Rs.2,50,000 for Individuals, HUF below 60 years aged and NRIs for FY 2020-21. An additional 4% Health & education cess will be applicable on the tax amount calculated as above.
B. For age 60-80 years
Income tax exemption limit is up to Rs. 3,00,000 for senior citizen aged above 60 years but less than 80 years for FY 2020-21. An additional 4% Health & education cess will be applicable on the Income tax amount calculated.
C. For age above 80 years
Income tax exemption limit is up to Rs. 5,00,000 for super senior citizen aged above 80 years for FY 2020-21. An additional 4% Health & education cess will be applicable on the tax amount calculated as above.
New Income Tax Rate Regime
This tax regime is optional, here is the reason why is it optional? In this regime, taxpayers have an OPTION to choose either to pay income tax at lower rates as per New Tax regime on the condition that they can forgo certain exemptions and deductions available under income tax, or They continue to pay taxes under the existing tax rates. The assessee can avail rebates and exemptions by staying in the old regime and paying tax at the existing higher rate.
Income tax slab rate for New Tax regime – FY 2020-21.
Income tax rates in the New tax regime is the same for all categories of Individuals, i.e. Individuals up to 60 years of age, Senior citizens above 60 years up to 80 years and Super senior citizens above 80 years and for Hindu undivided Family (HUF). Additional Health and Education cess at the rate of 4 % will be added to the income tax liability in all cases..
|Income Tax Slab
|New Regime Income Tax Slab Rates for FY 2020-21
(Applicable for All Individuals & HUF)
|Rs 0.0 – Rs 2.5 Lakhs
|Rs 2.5 lakhs- Rs 5.00 Lakhs
|5% (tax rebate u/s 87a is available)
|Rs. 5.00 lakhs- Rs 7.5 Lakhs
|Rs 7.5 lakhs – Rs 10.00 Lakhs
|Rs 10.00 lakhs – Rs. 12.50 Lakhs
|Rs. 12.5 lakhs- Rs. 15.00 Lakhs
|more than Rs. 15 Lakhs
Surcharge under Income Tax
Surcharge is a tax on tax which shall be calculated on total income tax payable before Health and Education Cess. In both New and old tax regimes, Surcharge will be applicable as per tax rates below in all categories of individuals and HUF, mentioned above:
1. 10% of Income tax if total income more than Rs.50 lakh
2. 15% of Income tax if total income more than Rs.1 crore
3. 25% of Income tax if total income more than Rs.2 crore
4. 37% of Income tax if total income more than Rs.5 crore
Other than the above-mentioned taxpayers Income tax is levied on the income earned by all HUFs, partnership firms, LLPs and Corporate as per the Income tax Act of India.
In these cases tax is levied as per the slab system defined for these only if their income is above the basic exemption limit.
Income Tax Rebate
Section 87A specifies that a resident individual can obtain a rebate of up to Rs.12,500, if the Total taxable income (after deductions) is not in excess of Rs.5 lakh. For example, in case income tax payment amounts to Rs.10,000, Section 87A provides you a rebate of full Rs. 10,000 amount. This rebate is given before the addition of the 4% cess.
In both New and old tax regimes. Individuals with net taxable income less than or equal to Rs 5 lakh will be eligible for tax rebate u/s 87A.
Taxation of Special Income
Special incomes have a different rate of tax but they are the same for every Assessee.
|Rate of tax
|Long term Capital Gain U/S 112
|Long term Capital Gain U/S 112A above Rs 1,00,000
|Short term Capital Gain U/S 111A
The author of the above article is Sneha Bhalotia.
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