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Income Tax Slabs - New Income Tax Slabs 2021 & Tax Rates for FY 2021-22

Income tax slabs

Income Tax Slabs - New Income Tax Slabs 2021 & Tax Rates for FY 2021-22


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June 28, 2021

By : Bajaj Allianz Life

Paying taxes can be a tedious process as it requires you to be well-versed with the rules and norms pertaining to how to do so. This article seeks to aid readers by providing them with an understanding of income tax slabs and the differences that persist between the Old Tax regime and the New Tax regime. As taxpayers, individuals are entitled to prescribe to either one of their choices.

 

What is the income tax slab?

 

The government of India charges an income tax applicable to sole taxpayers which is prescribed on the basis of a system of slabs. This system functions by categorizing varied tax rates which are applicable to varied ranges of income. Increases in tax rates correspond to increases in the income of a taxpayer. This manner of taxation allows is progressive and fair to all taxpayers. Income tax slabs are capable of being altered at as per the Finance Bill introduced in the Parliament every year. Slab rates may alter for different strata of taxpayers.

Thus far, categories recognized under individual taxpayers are qualified as follows –

  • Individuals under 60 years of age (residents and non-residents included)
  • Senior citizens who are residents and fall between 60 to 80 years of age.
  • Super senior citizens who are residents and are older than 80 years of age.

 

Income Tax Slab Rates for FY 20-21 (AY 2021-22) & FY 21-22 (AY 2022-23)

 

The income tax slab rates for FY20-21(AY 2021-22) & FY 21-22 (AY 2022-23) can be understood as follows –

 

Income tax slab rate under New Tax regime from FY 2020-21

 

The New Tax regime in place from FY 2020-21 makes it possible for taxpayers to choose from the following options –

  • Income tax can be paid at reduced rates keeping in mind the New Tax regime provided said taxpayers are willing to give up certain permissible exemptions and deductions in place under income tax.
  • Taxpayers may continue to pay their taxes in accordance with the pre-existing tax rates. This rate is higher and therefore allows the taxpayer to avail rebates and exemptions.

As per the New Tax regime for FY 2020-2021, the income tax slab rate is as follows and is applicable to all categories of individuals i.e., individuals and HUF falling under 60 years of age, senior citizens, and super senior citizens.

Income Tax Slab

Rates for Income Tax Slab FY 2020-21 & FY 2021-22 (New Regime)

₹0.0 – ₹ 2.5 Lakhs

NIL

₹ 2.5 Lakhs- ₹ 3.00 Lakhs

5% (Tax rebate permissible under section 87A)

₹ 3.00 Lakhs – ₹ 5.00 Lakhs

5% (Tax rebate permissible under section 87A)

₹ 5.00 Lakhs- ₹ 7.5 Lakhs

10%

₹7.5 Lakhs – ₹ 10.00 Lakhs

15%

₹10.00 Lakhs - ₹12.50 Lakhs

20%

₹12.50 Lakhs - ₹ 15.00 Lakhs

25%

> ₹15.00 Lakhs

30%

Things to bear in mind -

  • The New Tax regime dictates that those who have a net taxable income that falls under or is equivalent to ₹5 Lakhs are entitled to a tax rebate permissible under section 87A of Income Tax Act 1961. This implies that their tax liability will amount to nil in the new as well as pre-existing tax regimes.
  • Non-residential Indians (or NRIs) have an exemption limit amounting to ₹2.5 Lakhs regardless of their age.
  • Additionally, individuals will have a health and education cess amounting to 4% which is applicable to the income tax liability.
  • There is a surcharge applicable to all categories of individuals in the event that their income exceeds the following amount –
    • ₹ 50 Lakhs - 10% of income tax
    • ₹ 1 Crore - 15% of income tax
    • ₹ 2 Crore - 25% of income tax
    • ₹ 5 Crore - 37% of income tax

 

Income tax slabs rate under Old Tax regime - FY 2020-21 & FY 2021-22

 

As per the Old Tax regime for FY 2020-2021 & FY 2021-22, the income tax slab rates are as follows and is applicable to individuals and HUF falling under 60 years of age.

Income Tax Slab

Taxpayers Under 60 Years of Age

₹ 0.0 - ₹2.5 Lakhs

NIL

₹2.5 Lakhs - ₹5 Lakhs

5%

₹ 5 Lakhs - ₹ 10 Lakhs

20%

> ₹ 10.00 Lakhs

30%

As per the Old Tax regime for FY 2020-2021, the income tax slab rates are as follows and is applicable to individuals aged between 60 and 80 years i.e., senior citizens.

Income Tax Slab

Senior Citizen Tax Slabs (60 – 80-year-olds)

₹ 0.0 - ₹3 Lakhs

NIL

₹3 Lakhs - ₹5 Lakhs

5%

₹ 5 Lakhs - ₹ 10 Lakhs

20%

> ₹ 10.00 Lakhs

30%

As per the Old Tax regime for FY 2020-2021 & FY 2021-22, the income tax slab rates are as follows and is applicable to individuals aged over 80 years i.e., super senior citizens.

Income Tax Slab

Super Senior Citizen Tax Slabs (80 years & older)

₹ 0.0 - ₹5 Lakhs

No tax

₹ 5 Lakhs - ₹ 10 Lakhs

20%

> ₹ 10.00 Lakhs

30%

Things to bear in mind –

  • As per the Old Tax regime for FY 2021 & FY 2022, super senior citizens (aged 80 and older) and entitled to a limit of income tax exemption amounting to up to ₹5 lakhs.
  • Additionally, individuals will have a health and education cess amounting to 4% which is applicable to the tax calculated above.
  • There is a surcharge applicable to all categories of individuals in the event that their income exceeds the following amount –
    • ₹ 50 Lakhs - 10% of income tax
    • ₹ 1 Crore - 15% of income tax
    • ₹ 2 Crore - 25% of income tax
    • ₹ 5 Crore - 37% of income tax

 

Difference in the slab rates between the New Tax regime & the Old Tax regime

 

Variations in the income tax slab rates mentioned in the New Tax regime and Old Tax regime have been made more apparent in the table mentioned below.

Income Tax Slab

Pre-existing / Old Regime Slab Rates for FY20-21 & FY 21-22

New Regime Slab Rates for FY 20-21 & FY 21-22

Individuals & HUF < 60 + NRIs

Resident individuals & HUF (aged b/w 60 - 80)

Resident individuals & HUF > 80 years

Applies to all individuals & HUF

₹ 0.0 - ₹2.5 Lakhs

NIL

NIL

NIL

NIL

₹2.5 Lakhs - ₹ 3 Lakhs

5% (Tax rebate permissible under section 87A)

NIL

NIL

5% (Tax rebate permissible under section 87A)

₹3 Lakhs - ₹ 5 Lakhs

5 % (Tax rebate permissible under section 87A)

NIL

₹ 5 Lakhs - ₹ 7.5 Lakhs

20%

20%

20%

10%

₹ 7.5 Lakhs - ₹ 10 Lakhs

20%

20%

20%

15%

₹ 10 Lakhs - ₹ 12.50 Lakhs

30%

30%

30%

20%

₹ 12.50 Lakhs - ₹15 Lakhs

30%

30%

30%

25%

> ₹ 15 Lakhs

30%

30%

30%

30%

As taxpayers, individuals have the choice to avail of either the Pre-existing Tax regime or avail of the New Tax regime. In the event they choose the latter, they will have to give up a specified set of exemptions and deductions available under the Old Tax regime. Exemptions and deductions permissible under the Old Tax regime but not the New Tax regime amount to 70 in all. Of these, some of the more popular ones have been mentioned below –

  • Children education allowance
  • Conveyance allowance
  • Daily expenses in the course of employment
  • Deduction under Chapter VI-A deduction (80C,80D, 80E, and so on) (Except Section 80CCD(2))
  • Helper allowance
  • House Rent Allowance (HRA)
  • Interest on housing loan (Section 24)
  • Leave Travel Allowance (LTA)
  • Other special allowances [Section 10(14)]
  • Professional tax
  • Relocation allowance
  • Standard deduction on salary

 

How to Calculate Income Tax from Income Tax Slabs?

 

Consider the following example to better understand how income tax is calculated from income tax slabs –

Mr. Singh has a taxable income amounting to ₹ 8 Lakhs in its entirety and has been arrived at keeping in mind his varied sources of income ranging from his salary to money derived from rent and interest. This amount has also accounted for the deductions mentioned in Section 80 which have accordingly been reduced. Based on his profile, his taxes applicable to him are as follows -

Income Tax Slabs

Tax Rate

Tax Calculation

₹ 0.0 - ₹ 2.5 Lakhs

No tax

 

₹ 2.5 Lakhs - ₹ 5 Lakhs

5% of (₹ 5 Lakhs - ₹2.5 Lakhs)

₹12,500

₹ 5 Lakhs - ₹ 10 Lakhs

20% of (₹ 8 Lakhs - ₹5 lakhs)

₹60,000

> ₹10 Lakhs

30%

NIL

TAX

 

₹72,500

CESS

4% of ₹72,500

₹2,900

Total Tax in FY 2020-21 (AY 2021-2022)

 

₹75,400

It is important to recognize that Mr. Singh is entitled to a tax exemption of ₹2.5 Lakhs as he falls under the age of 60. Had he been a senior citizen he would have had a tax exemption amounting to ₹3 Lakhs and ₹5 Lakhs had he been a super senior citizen.

 

Conclusion

 

Laws pertaining to income tax can be hard to grasp. With the material provided in this article, individuals should be better equipped to understand income tax slabs. They can now make informed decisions on whether to continue using the Old Tax regime or the New Tax regime.

Disclaimer: Readers are requested to consultant professional tax consultant and obtain independent advice before taking any decisions having income tax implications.

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~Tax benefits as per prevailing Income tax laws shall apply. Please check with your tax consultant for eligibility.

The above information is for general understanding and is meant to educate the general public at large. The reader will have to verify the facts, law and content with the prevailing tax statutes and seek appropriate professional advice before acting on the basis of the above information.