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Tax Rate in India

Almost all the people in the country who pay taxes may be intentionally through direct taxes or unintentionally through indirect taxes. Though taxes are something that everyone seems to know about, there are many who, despite paying taxes for years, seem to have their own set of queries and questions. However, not knowing enough about the tax rates in India that you need to pay and how you need to pay them, can land you in trouble. It, therefore, becomes imperative to know how taxes work and what are your tax liabilities.

Income Tax

Income Tax is something that every individual who earns must know about. As the name suggests, it is the tax that is levied by the government of India on everyone who earns an income. The tax is calculated on the basis of the total income of a person in a financial year that is 1st April to 31st March.

People, who are new to this tax may often wonder, “Why does our own government charge a tax from us?” The answer is simple, the funds that are collected by the government are appropriated for the development of infrastructure of the country, be it education, healthcare, defense, and welfare of the countrymen.

To know about the tax rate in India and to understand if you are eligible for paying income tax you first need to understand your own income. The salary slip/ statement that you receive from your workplace is an important document that helps you comprehend the income tax structure. What you also need to remember is that income tax does not only constitute your salary but also includes all the other modes of your income, which could be from:

  • Your business
  • Your property in the form of rent
  • Capital gains
  • Other sources such as FDs, gifts received, etc.

 

Tax Rate In India

In India, for every taxpayer, there is a set system to pay the tax. Individuals, Hindu Undivided Families, firms, companies pay as per the tax rate in India. In the Budget, the finance minister announces the modifications that may be brought in the tax rates. In the year 2020, Smt Nirmala Sitaraman, the Finance Minister of the country, introduced a “New Tax Regime” for individuals and HUF taxpayers. However, the taxpayer has the freedom to choose any of the two regimes – Old Tax Regime or New Tax Regime.

Apart from the income, an individual’s age is also kept in mind while categorizing the tax rates in India. The residents are divided into the following categories:

  1. Below the age of 60
  2. Senior Citizens – Between the age of 60 to 80 years
  3. Super Senior Citizens – Over the age of 80 years

 

Given below are the tax slabs, for the Financial Year 2021-22, for the Indian residents who are under 60 years of age, NRIs and HUFs:

Old Tax Rate in India Tax Slab (INR) New Tax Rate in India
NA 0 – 2,50,000 NA
5% 2,50,000 – 5,00,000 5%
20% 5,00,000 – 7,50,000 10%
20% 7,50,000 – 10,00,000 15%
30% 10,00,000 – 12,50,000 20%
30% 12,50,000 – 15,00,000 25%
30% 15,00,000 & above 30%

Let us now take a look at the payable tax, under the Old Tax Regime

Income Range Tax Rate Tax Payable
Up to INR 2.5 lakhs Nil Nil
From INR 2.5 lakhs – 5 lakhs 5% 5% of the taxable income
From INR 5 lakhs – 10 lakhs 20% INR 12,500 plus 20% of income over Rs. 5 lakhs
Over INR 10 lakhs 30% INR 1,12,500 plus 30% of income over INR 10 lakhs

Income Tax Rates in India for the Senior Citizens in the age group 60 – 80 years

Old Tax Rate in India Tax Slab (INR) New Tax Rate in India
NA 0 – 2,50,000 NA
NA 2,50,000 – 3,00,000 5%
5% 2,50,000 – 5,00,000 5%
20% 5,00,000 – 7,50,000 10%
20% 7,50,000 – 10,00,000 15%
30% 10,00,000 – 12,50,000 20%
30% 12,50,000 – 15,00,000 25%
30% 15,00,000 & above 30%

 Income Tax Rates in India for the Super Senior individuals who are over the age of 80 years

Old Tax Rate in India Tax Slab (INR) New Tax Rate in India
NA 0 – 2,50,000 NA
5% 2,50,000 – 5,00,000 5%
20% 5,00,000 – 7,50,000 10%
20% 7,50,000 – 10,00,000 15%
30% 10,00,000 – 12,50,000 20%
30% 12,50,000 – 15,00,000 25%
30% 15,00,000 & above 30%

Things to keep in mind

  1. The tax that is calculated is subject to a health and education cess that is 4%
  2. A rebate of INR 12,500 would be open under section 87A
  3. No income tax would be payable for an income up to INR 5 lakhs in the old as well as the new tax regime
  4. The rebate under section 87A would not be open for Hindu Undivided Families (HUF)
  5. If an individual wish to opt for the New Tax Regime in the financial year 2020-2021, he/ she would not be eligible for the listed deductions and exemptions:
    1. House Rent Allowance
    2. Children Education Allowance\Standard Deductions
    3. Professional Tax
    4. Leave Travel Allowance
    5. Relocation Allowance
    6. Housing Loan Interest
    7. Other special allowance
    8. Standard deduction

 

If you are a senior citizen or a super senior citizen, who wants to opt for the new tax regime, keep in mind that you would not be eligible for the higher exemption limit. The limit of exemption in INR 3 lakhs and INR 5 lakhs for senior citizens and super senior citizens respectively would not be applicable under the new tax regime. As mentioned above the basic exemption limit is INR 2.5 lakhs for each taxpayer.

As a responsible citizen of India, it is not just your responsibility but also your duty to pay your taxes as per the tax rate in India. Being careless or trying to avoid taxation, may save you a little for a while, but you can get into serious trouble later. You would not only be penalized but you can also get into a legal struggle.

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