Updated: Feb 7, 2021
Every year with Finance Budget, all taxpayers are keen to know about how much tax they'll need to pay, and how much tax they can save. Besides tax saving investment knowing tax rates is essential to understand how your income is taxed as per slab rates. Today in this article we have simplified the tax rates and tax calculation on Income.
In this article we have discussed:
Income Tax Slab Rates
Income Tax is levied on income as per slab rates. Slab rates are defined rates of taxes for a particular range of Total Taxable Income for the year. In India, tax is charged on the Income with consideration to the age and the total income. On the basis of age, taxpayers are categorized as follows:
Individual with less than 60 years of age
Senior Citizens ( 60 to 80 years of age)
Resident Super Senior Citizens (More than 80 years of age)
Income Tax Slab Rates for AY 2021-22 (FY 2020-21)
In finance budget 2020, Section 115BAC was introduced, accordingly, Tax Payers are given an option to opt for a preferable tax regime i.e Old Tax Regime and New tax Regime under Section 115BAC. In this article, we have discussed both the Tax Slab Rates. Let's see what is the difference between these 2 tax regimes:
SLAB RATES UNDER NEW TAX REGIME AY 2021-22 (FY 2020-21)
POINT TO BE NOTED FOR NEW TAX REGIME:
New Tax Slab rate is applicable to Individual & HUF and to all categories of taxpayer i.e Individual, Senior Citizen, Super Senior Citizen & HUF those who opt for new regime. Benefit of higher basic exemption for senior citizen is not available under the new regime.
No set-off of losses (including loss under head house property) or set-off of carried forward loss or depreciation of any previous year which is related to the deductions (which are not allowed).
Taxpayers having income less than Rs.5 Lakhs and opting for the new regime are eligible for Rebate under section 87A. In such a case tax payable will be NIL for Income up to Rs. 5 lakhs
As in the old tax regime, an additional 4% cess will be applied to tax liability
For NRIs, the basic exemption limit will be Rs.2.50 lakhs
A surcharge will be applicable for Income more than Rs. 50 lakhs
In the new Tax Regime, Tax rates are lower than the old Tax Regime but Tax Payer will not get the benefit of certain deductions and exemptions as in the Old Tax Regime such as:
LIST OF EXEMPTIONS & DEDUCTIONS NOT ALLOWED UNDER NEW TAX REGIME
LIST OF DEDUCTIONS ALLOWED UNDER NEW TAX REGIME
SLAB RATES UNDER OLD TAX REGIME AY 2021-22 (FY 2020-21)
Income Tax Slab Rate for Individuals & HUF
a. Below 60 years of age
b. Senior Citizen (60 to 80 Years)
c. Super Senior Citizen (80 years and more)
OPT-IN AND OPT-OUT UNDER NEW TAX REGIME
1. Who can opt-in for the new tax regime?
The following taxpayers can opt for the new tax regime:
2. Is it Mandatory to opt-in for the new tax regime?
No, it is not mandatory to opt under a new regime. A taxpayer can compare the tax considering both the rates and accordingly opt-in or out under the new regime.
3. Can we opt-in for one year and opt-out in the next year from the new regime?
It differs from case to case based on the nature of the income of a taxpayer, as below:
Having Income from Salaries and under any other heads (Except Business/Profession)
In the case of an individual having income from salaries, he can opt-in and opt-out in subsequent years without any restrictions.
For e.g. A salaried employee can opt-in for the new regime in AY 2021-22 and can opt-out in AY 2022-23 then again he can opt-in in subsequent years.
Having Income from Business/Profession
In the case of an Individual/HUF having a business or profession income, a taxpayer can opt-in in any year from AY 2021-22 (FY 2020-21), and once exercised tax will be applicable as per the new rate in all of the subsequent years. If subsequently in any year, a taxpayer opts-out of the new tax regime then such taxpayer is not eligible for the new regime in any subsequent years i.e he can never opt-in again. He will be eligible to opt-in again only when business/profession income is ceased and he is having income under any other heads.
4. How to opt-in under the new tax regime?
A taxpayer has to tick the option while filing the income tax return, whether the taxpayer wants to pay tax under a new regime (i.e as per 115BAC) or an old regime .
For salaried individuals, they have to choose the preferred tax regime at the beginning of the financial year and should intimate their employer about the same, accordingly tax will be calculated and TDS will be deducted, once opted it can not be changed during the year. However, they can change the preferred tax regime while filing returns, irrespective of what is intimated to an employer.
5. Which option is best, New Regime or Old Regime?
Well, that depends on the total income and the tax-saving deductions that are available. Generally, a new tax regime is beneficial for taxpayers having income up to 15 lakhs and with minimal deductions. However, Old regime is a better option for high-income earners. But before making a decision on the basis of income, it is advisable to calculate tax under both rates and identify the best options.
Calculate Income Tax for AY 2021-22 (FY 2020-21):
To calculate income tax under Old and New Tax Regime on income tax official portal, click here.
Steps to calculate Income Tax on official Income Tax Calculator:
Go to the following: Tax Calculator
Select a relevant assessment year
Select Tax Payer type
Whether opting for tax under 115BAC? : Select "Yes" to calculate tax as per the new regime and "No" for the old regime.
Select Male/Female/Senior Citizen
Select Residential Status
Fill in the details of Income and Deduction
Click on calculate button