People of a region or a country pay income tax to its government so that the authorities can use the money for the betterment of the people. Income tax is a portion of your income that you pay to the authorities on an annual basis. But how much income tax does one pay? This is where income tax slabs come in the picture.

Income Tax Slabs and Rates in India FY 2020-21 - Acko

Read ahead to know more about income tax slabs, individual tax rates, senior citizen tax slab, etc. The article will help you to plan your finances in a better manner as you will come to know your taxable income and ways to save tax.

Contents

New Tax Regime 2020:

The Union Budget for 2020 brought with it a change in the tax calculation for individuals. The budget offered a new personal income tax regime for 2020. An individual taxpayer must choose whether the tax calculation should be as per the old regime or the new regime. As compared to the earlier tax structure, the new tax slabs are not based on a person’s age.

In simple words, the new tax calculation table offers lower tax rates but does not include the benefits offered by popular deductions such as Leave Travel Allowance (LTA) and House Rent Allowance (HRA). There are seven tax slabs as per the new tax regime of 2020. You must assess your income and investments and make a suitable choice between the old and the new structure.

Tax Slabs for Individuals Under New Tax Regime for FY 2020-21:

Here’s a table that will give you an idea about the applicable income tax rate in India as per the new personal tax regime and income tax slabs for 2020-21.

Income Tax SlabTax Rate (subject to health and education cess of 4%)
Up to Rs 2.5 lakhNIL
Rs 2.5 lakh to Rs 5 lakh5% (Tax rebate of Rs 12,500 available under section 87A)
Rs 5 lakh to Rs 7.5 lakh10%
Rs 7.5 lakh to Rs 10 lakh15%
Rs 10 lakh to Rs 12.5 lakh20%
Rs 12.5 lakh to Rs 15 lakh25%
Rs 15 lakh and above30%
Income Tax Slabs Under New Tax Regime (FY 2020-21)

Existing Tax Regime:

If you choose to go for the existing tax regime, your tax will be calculated as per the existing tax slabs. The new tax slabs will not apply to you and you can continue to benefit from applicable tax deductions.

Comparison of New Tax Regime with Old Tax Regime:

You can have a look at the following table for better understanding of the new and old tax regimes. This is a basic representation and comparison of the two regimes. You are requested to factor-in your income, investments and applicable tax deductions to determine whether the tax slab for 2020-21 suits you or not.

Income slabs (Rs)Tax Rate (Old Regime)Tax Rate (New Regime – devoid of exemptions & deductions)
Up to 2.5 lakhNilNil
2.5-5 lakh5%5%
5-7.5 lakh20%
7.5-10 lakh20%15%
10-12.5 lakh30%20%
12.5-15 lakh30%25%
Above 15 lakh30%30%
Note: Stated rates are subject to applicable surcharge and cess.

If you are finding it difficult to choose between the two regimes, an online tax calculator can help you out. Indian Income Tax department has come up with a simple and easy-to-use online tax calculator.

How to Compare Tax Under Old and New Tax Regime Using E-calculator:

Here’s how you can compare and decide which tax regime is ideal for you.

  • Step 1 – Visit Income Tax India E-filing Website.
  • Step 2 – Select Age.
  • Step 3 – Mention Estimated Annual Income.
  • Step 4 – Mention Exemptions and Deductions.
  • Step 5 – Click ‘Compare’.
  • Step 6 – Check Results.

Once you get the results, check the figure mentioned against Tax Payable as per Old Regime and Tax Payable as per New Regime. The calculator will also show you the tax benefit. Use the calculator as a guide and make an informed choice.

What is the Meaning of The Income Tax Slab Rate?

As mentioned in the introductory paragraph, every Indian citizen must pay tax as per the Income Tax Act, 1961. It is a portion of the income a person earns in a financial year, which means between 1st April and 31st March. However, one cannot be taxed equally. This is because if low-income earning people are taxed the same way high-earning people are taxed, it will be disastrous.

Similarly, if high-earning people are taxed the same way as low-earning people, that will not be good for the country’s economy. Therefore, different income-earning people are taxed differently. This and other classifications are done through income tax slab rates. Slabs are stated by the government while making the budget announcements. They might change on an annual basis.

What are the Three Categories of Individual Taxpayers in India?

The three categories of individual taxpayers in India are as follows.

1) Individuals Below 60:

These are individuals that are less than 60 years old. The individual can be a resident or non-resident.

2) Resident Senior Citizen:

This category is for people who are above sixty years of age and are residents of India. As they are above sixty years of age, they are termed as senior citizens.

3) Resident Super Senior Citizen:

People above the age of sixty are classified under this category. They should be Indian residents. As they are above 80 years of age, they are referred to as super senior citizens.

New Income Tax Slabs and Rates for Individual Tax Payers & HUF Financial Year: 2019-20

Here are some tables that will highlight the income tax slab rate for FY 2019-20.

New Income Tax Slab For FY 2019-20 for People Below 60 years of Age:

Income Tax SlabTax Rate
Up to Rs. 2,50,000Nil
Rs. 2,50,001 to Rs. 5,00,0005% of total income exceeding Rs. 2,50,000
Rs. 5,00,001 to Rs. 10,00,000Rs. 12,500 + 20% of total income exceeding Rs. 5,00,000
Above Rs. 10,00,000Rs. 1,12,500 + 30% of total income exceeding Rs. 10,00,000

Note: Additional 4% Health & education cess will apply to the tax amount calculated as above.

Income Tax Slab For FY 2019-20 for People in the Age Group of 60 and 80:

This is also known as the income tax slab for senior citizens.

Income Tax SlabsTax Rate
Income up to Rs 3,00,000No tax
Income from Rs 3,00,000 – Rs 5,00,0005%
Income from Rs 5,00,000 – 10,00,00020%
Income more than Rs 10,00,00030%

Note: Additional 4% Health & education cess will apply to the tax amount calculated as above.

Income Tax Slab for FY 2019-20 People Above 80 Years of Age:

Income Tax SlabsTax Rate
Income up to Rs 5,00,000No tax
Income from Rs 5,00,000 – 10,00,00020%
Income more than Rs 10,00,00030%

Note: Additional 4% Health & education cess will apply to the tax amount calculated as above.

Income Tax Slab rate for Women:

There is no separate income tax slab for women for the year 2019-20. A few years ago, there was a different income tax slab for women where the tax exemption rate was higher for women than men. However, that is not the case in the new tax slab 2019-20.

Check: Income Tax Calendar 2020 for Taxpayers with all Deadlines

Understanding Surcharge on Income Tax:

A surcharge is like an additional tax. In simple words, it is a tax on tax, which one pays to the government. It applies to rich people, those who earn more than Rs. 50 lakhs within a span of the accounting year. In certain cases, the government also offers marginal relief for some taxpayers.

Surcharges for FY 2019-20:

Taxable IncomePercentage of Surcharge
When income is more than Rs. 50 lakh but less than Rs. 1 crore.10
When income is more than Rs. 1 crore but less than Rs. 2 crores.15
When the income is above Rs. 2 crores but less than Rs. 5 crores.25
When income is above Rs. 5 crores.37

Income Tax Slabs For Domestic Companies:

The following table is about tax slabs for domestic companies for two different Assessment Years.

Slabs for Domestic Companies:Assessment Year 2019-20Assessment Year 2020-21
Total turnover/gross receipt during 2016-17 does not exceed Rs. 250 crore.25%NA
Total turnover/gross receipt during 2017-18 does not exceed Rs. 400 crore.NA25%
Opted for Section 115BA25%25%
Opted for Section 115BAANA22%
Opted for Section 115BABNA15%
Other domestic company30%30%

Income Tax Slabs For Local Authority:

Income tax slabs for a local authority for the period 2019-20 and 2020-21 is at 30%

Income Tax Slabs For Partnership Firm:

Income tax slabs for partnership firms for the 2019-20 and 2020-21 is at 30%.

Income Tax Slabs For Foreign Companies:

Know more about the tax slabs for international companies by going through the following table.

Nature of IncomeTax rate
Income as royalty compensated by the Indian Government. 50%
Foreign Company having its operations in India receives income concerning the technical services provided.50%
Additional income 40%

Income Tax Slabs For Co-operative Societies:

Here’s a table highlighting income threshold and the applicable tax rate for Co-operative societies.

Income ThresholdTax rate applicable
Up to Rs. 10,00010%
Rs. 10,001 to  Rs. 20,00020%
Over  Rs. 20,00030%

Income Tax Slabs and Tax Rates for FY 2018-19:

The following section is about income tax slabs and tax rates for the financial year 2018-19. The tables are differentiated age-wise for better understanding.

IT Slabs for Individual Taxpayers & HUF (Less Than 60 Years Old) for FY 2018-19:

Income Tax SlabsTax Rate
Up to Rs. 2,50,000*Nil
Rs. 2,50,001 to 5,00,0005% of total income exceeding Rs. 2,50,000
Rs. 5,00,001 to 10,00,000Rs. 12,500 + 20% of total income exceeding Rs. 5,00,000
Above Rs. 10,00,000Rs. 1,12,500 + 30% of total income exceeding Rs. 10,00,000

Note: An additional 4% Health & education cess will apply to the tax amount calculated as above.

Income Tax Slabs for Senior Citizens (60 Years Old Or More but Less than 80 Years Old) for FY 2018-19:

Income Tax SlabsTax Rate
Income up to Rs 3,00,000No tax
Income from Rs 3,00,000 – Rs 5,00,0005%
Income from Rs 5,00,000 – 10,00,00020%
Income more than Rs 10,00,00030%

Note: An additional 4% Health & education cess will apply to the tax amount calculated as above.

Income Tax Slabs for Super Senior Citizens (80 Years Old or More) for FY 2018-19:

Income Tax SlabsTax Rate
Income up to Rs 5,00,000No tax
Income from Rs 5,00,000 – 10,00,00020%
Income more than Rs 10,00,00030%

Note: An additional 4% Health & education cess will apply to the tax amount calculated as above.

Surcharge Applicable to the Individuals Covered in the above Sections:

Income limitSurcharge Rate on the amount of income tax
Net income exceeds Rs.50 Lakhs but doesn’t exceed Rs. 1 Crore10%
Net income exceeds Rs.1 Crore 15%

Income Tax Slabs for Domestic Companies for FY 2018-19:

Turnover ParticularsTax Rate
Gross turnover up to 250 Cr. in the FY 2016-1725%
Gross turnover exceeding 250 Cr. in the FY 2016-1730%

Cess and surcharge is levied as follows: Cess: 4% of corporate tax

Surcharge applicable:

Income LimitSurcharge Rate on the amount of income tax
Net income exceeds Rs.1 Crore but doesn’t exceed Rs.10 Crore7%
Net income exceeds Rs.10 Crore12%

Crucial Points About Income Tax Rates in India:

Here are some important points to note about income tax rates in India.

  •  Tax rates are different for different people as per their classification.
  •  Tax slabs might or might not change on an annual basis.
  •  Tax rates are as per provisions of the Income Tax Act.
  •  Make sure to pay tax and file Income Tax Returns before the deadlines.
  •  Keep proof of investments handy.

Tips to Save Income Tax:

Here are some tips that can help you save income tax

  •  Buy life insurance.
  •  Buy health insurance.
  •  Invest in long-term fixed deposits.
  •  Invest in Public Provident Fund (PPF), National Pension System, National Savings     Certificate.
  •  Submit rent receipts.
  •   Interest on loan for higher education is tax-deductible.

To know more income tax-saving initiatives, read 32 Easy Ways to Save Tax in 2020

Also, check: Official List of Income Tax Contact Details

Frequently Asked Questions:

Listed below are some common questions about tax slabs in India.

Income tax is calculated on what basis in India

Income tax in India is calculated based on tax slabs. For people, it is an individual tax slab and for corporates, it is a corporate tax slab.

How much money is taxable from an employee’s salary?

The amount of money taxable from an employee’s salary depends upon the amount received as salary and tax-saving investments made by the employee among other things.

Is there any specific income that is not taxable in India?

Income Tax Act, 1961 states non taxable income under section 10.

Is there a maximum non-taxable income limit?

Income under the slab of Rs. 2.5 lakhs is not taxable. Further, one can get tax rebate as per section 87A for income up to Rs. 5 lakhs.

Who must file income tax?

If you hold a PAN card, you must file income tax.

Out of the New Tax Regime and Old Tax Regime, which one is better?

There is no direct answer to this question. The answer usually varies from one person to another. Different factors come in the picture: the person’s income, investment, applicable deductions, etc.
To find out which tax regime is suitable for you, you can understand both regimes, note the exemptions and deductions applicable to you, consider your financial planning initiatives in the short-run as well as the long-run and make the choice between the old tax regime and the new tax regime.


News Realted to Income Tax Slabs and Rates:

No Separate Certificate for PM-CARES Donations By Employee Through Employer

– April 14, 2020

Employee contributions towards PM-CARES fund through the employer will not get separate tax deduction certificates, instead, they will mention the amount in Form 16 issued to the employees. In a circular, the Central Board of Direct Taxes (CBDT) said that if the employee contribution towards PM-CARES fund is through his or her employer, in such cases separate tax certificates cannot be issued. The tax deductions towards the contributions will be under Section 80G of the IT Act and be indicated that such donations will be mentioned in the Form-16. Earlier the Centre had issued a notification stating that employee contributions towards the PM-CARES Fund can claim 100% tax deductions compared to the earlier 50%.

Financial Year 2019-20 Has Not Been Extended to 30 June

– April 1, 2020

The Finance Ministry of India said that the FY 2019-20 has not been changed to 30 June 2020. The ministry said that an amendment will be made to a notification on 8 January 2020. The notification includes figures and words “the 1st day of July 2020” will be substituted with “the 1st day of April 2020”. There was speculation that the fiscal year has been changed to 30 June; however, the clarification by the finance ministry states that the extension is for some compliance.

New, Optional Income Tax Regime For Taxpayers Under Budget 2020

– February 3, 2020

Under Budget 2020, new income tax rates and slabs were announced. Taxpayers have the option to continue to pay income tax under the old rate or opt for the new income tax regime with reduced tax rates and new income tax slabs; however, they will have to forgo tax exemptions and deductions under Standard Deduction, Section 80D, Section 80C, HRA, LTA, interest on home loan on self-occupied house, etc. Individuals can get a maximum benefit of Rs.78,000 under the new income tax regime. Also, the dividend distribution tax on companies has been removed. The new tax rates will be effective from FY 2020-21.

References:

  • Tax Calculator for Resident Individuals FY 2020-21, e-Filing Anywhere Anytime, Income Tax Department, Government of India, https://www.incometaxindiaefiling.gov.in/Tax_Calculator/index.html?lang=eng
  • Tax Rates, Income Tax Department, Government of India, https://www.incometaxindia.gov.in/Charts%20%20Tables/Tax%20rates.htm