In India, income tax is levied on individual taxpayers on the basis of a slab system where different tax rates have been prescribed for different slabs and such tax rates keep increasing with an increase in the income slab.
Existing tax regime:
There are three categories of individual taxpayers:
- Individuals (below the age of 60 years), which includes residents as well as non-residents
- Resident senior citizens (60 years and above but below the age of 80 years)
- Resident super senior citizens (above 80 years of age)
There are different slabs for each category of taxpayers. The latest income tax slabs for AY 2019-20, AY 2020-21 and AY 2021-22 are discussed in this article. Such tax slabs tend to undergo a change during every budget.
New tax regime:
Budget 2020 has announced a new tax regime giving taxpayers an option to pay taxes as per the new tax slabs from FY 2020-21 onwards.
Income tax slabs under the new tax regime for all individuals for FY 2020-21 (AY 2021-22)
Income Tax Slab | Rate of Tax |
Up to Rs. 2,50,000 | Nill |
Rs. 2,50,001 to 5,00,000 | 5% (Tax Rebate of Rs. 12,500/- available under section 87A) |
Rs. 5,00,001 to 7,50,000 | 10% |
Rs. 7,50,001 to 10,00,000 | 15% |
Rs. 10,00,001 to 12,50,000 | 20% |
Rs. 12,50,001 to 15,00,000 | 25% |
Above Rs. 15,00,000/- | 30% |
The tax calculated on the basis of such rates will be subject to health and education cess of 4%.
Any individual opting to be taxed under the new tax regime from FY 2020-21 onwards will have to give up certain exemptions and deductions.
While choosing the new regime a tax payer has to give up all the exemptions and deduction available as per the old regime.
| Leave Travel Allowance | House Rent Allowance |
| Conveyance | Daily Expenses in the course of Employement |
| Relocation Allowance | Helper Allowance |
| Children Education Allowance | Other Special allowances [Section 10(14)] |
| Standard Deduction | Professional Tax |
| Interest on Housing Loan (Section 24) | Chapter VI-A deduction (80C, 80D, 80E and so on) except section 80CCD (2) and 80JJA |
Points to remember while opting for the new tax regime:
Option to be exercised on or before the due date of filing return of income for AY 2021-22
In case a taxpayer has a business income and exercised the option, he/she can withdraw from the option only once. A business taxpayer withdrawing from the optional tax regime has to follow the regular income tax slabs.
According to the current income tax laws in India, the income tax rate on resident individuals varies based on their age. There are different tax slabs applicable to the individuals for the financial year 2018-19 and 2019-20. For instance, a resident individual, aged below 60 years, with an income less than Rs 2.5 lacs is exempt from paying income tax.