Income tax is levied on the income earned by all the individuals, HUF, partnership firms , LLPs and Corporates as per the Income tax Act of India. In the case of individuals, tax is levied as per the slab system if their income is above the minimum threshold limit (known as basic exemption limit ).
Indian Income tax levies tax on individual taxpayers on the basis of a slab system. Slab system means different tax rates are prescribed for different ranges of income. It means the tax rates keep increasing with an increase in the income of the taxpayer. This type of taxation enables progressive and fair tax systems in the country. Such income tax slabs tend to undergo a change during every budget.These slab rates are different for different categories of taxpayers. Income tax has classified three categories of “individual “taxpayers such as:
In this new regime, taxpayers has an OPTION to choose either :
Please note that the tax rates in the New tax regime is the same for all categories of Individuals, i.e Individuals & HUF upto 60 years of age, Senior citizens above 60 years upto 80 years , and Super senior citizens above 80 years. Hence no increased basic exemption limit benefit will be available to senior and super senior citizens in the New Tax regime.
Individuals with Net taxable income less than or equal to Rs 5 lakh will be eligible for tax rebate u/s 87A i.e tax liability will be nil of such individual in both – New and old/existing tax regimes.
Basic exemption limit for NRIs is of Rs 2.5 Lakh irrespective of age.
Additional Health and Education cess at the rate of 4 % will be added to the income tax liability in all cases. (increased from 3% since FY 18-19)
Surcharge applicable as per tax rates below in all categories mentioned above:
10% of Income tax if total income > Rs.50 lakh
15% of Income tax if total income > Rs.1 crore
25% of Income tax if total income > Rs.2 crore
37% of Income tax if total income > Rs.5 crore
NOTE:
Income tax exemption limit is up to Rs 2,50,000 for Individuals , HUF below 60 years aged and NRIs.
An additional 4% Health & education cess will be applicable on the tax amount calculated as above.
Surcharge:
10% of income tax, where total income exceeds Rs.50 lakh up to Rs.1 crore.
15% of income tax, where the total income exceeds Rs.1 crore.
NOTE:
Income tax exemption limit is up to Rs. 3,00,000 for senior citizen aged above 60 years but less than 80 years.
An additional 4% Health & education cess will be applicable on the tax amount calculated as above
Surcharge applicability::
10% of income tax, where total income exceeds Rs.50 lakh up to Rs.1 crore.
15% of income tax, where the total income exceeds Rs.1 crore.
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NOTE:
Income tax exemption limit is up to Rs. 5,00,000 for super senior citizen aged above 80 years.
An additional 4% Health & education cess will be applicable on the tax amount calculated as above.
Surcharge applicability::
10% of income tax, where total income exceeds Rs.50 lakh up to Rs.1 crore.
15% of income tax, where the total income exceeds Rs.1 crore.
The taxpayer opting for concessional rates in the New Tax regime will have to forgo certain exemptions and deductions available in the existing old tax regime. In all there are 70 deductions & exemptions that are not allowed, out of which the most commonly used are listed below:
List of common Exemptions and deductions “ not allowed” under New Tax rate regime
Deduction under Chapter VI-A deduction (80C,80D, 80E and so on) (Except Section 80CCD(2))
List of deductions “allowed” under new Tax rate regime
Transport allowance for specially abled people
Conveyance allowance for expenditure incurred for travelling to work
Investment in Notified Pension Scheme under section 80CCD(2)
Deduction for employment of new employees under section 80JJAA
Depreciation u/s 32 of the Income-tax act except additional depreciation.
Any allowance for travelling for employment or on transfer
Here is a comparison between the deductions and exemptions available under the new and the old tax regime:
The new tax regime can largely benefit middle class taxpayers who have a taxable income upto Rs 15 lakh. Old regime is a better option for high-income earners.
The new income tax regime is beneficial for people who make low investments. As the new regime offers seven lower income tax slabs, anyone paying taxes without claiming tax deductions can benefit from paying a lower rate of tax under the new tax regime. For instance, assessee having total income before deduction up-to Rs 12 lakh will have higher tax liability under the old system if they have investments less than Rs 1.91 lakh. Therefore, if you invest less in tax-saving schemes, go for the new regime.
That being said, if you already have in place a financial plan for wealth creation by making investments in tax-saving instruments; mediclaim and life insurance; making payments of children’s tuition fees; payment of EMIs on education loan ;buying a house with a home loan; and so on, the old regime helps you with higher tax deductions and lower tax outgo.
In light of the above and considering the new income tax regime, if taxpayers want to opt for the concessional tax rates, they may evaluate both regimes. Hence, it is advisable to do a comparative evaluation and analysis under both regimes and then choose the most beneficial one as it may vary from person to person.
Let’s take an example of comparing the Old & New tax regime of an assessee with Rs 10 Lakh income.
Mr. Rahul has a salary income of Rs 10 lakh. His total investment u/s 80C is Rs 1.7 lakh under ELSS, PF, LIC premium and principal installment of home loan. Further he pays Medical insurance for himself and his wife of Rs 28,000. If he opts for the old tax regime, then he can claim the above deductions, however if he wishes to go for a new tax regime than these deductions will not be available. He has paid home loan interest of Rs 75,000 in FY 2020-21. Let us see the tax outflow in both the regimes.
As per illustration above, if the gross income is more than Rs 10 lakh or and deductions u/S 80C, 80D, and 24(b) of the Income Tax Act are availed , then older regime is more beneficial from tax planning standpoint. While for individuals in the middle-income group, earning a gross income of say Rs 5 lakh; the new tax slab regime may prove advantageous.
*Please refer to the new sections for checking the applicability for above concessional income tax rates.
Additional Health and Education cess at the rate of 4 % will be added to the income tax liability in all cases.
Please note that the tax rates in the New tax regime is the same for all categories of Individuals, i.e Individuals & HUF upto 60 years of age, Senior citizens above 60 years upto 80 years , and Super senior citizens above 80 years. Hence no increased basic exemption limit benefit will be available to senior and super senior citizens in the New Tax regime.
Individuals with net taxable income less than or equal to Rs 5 lakh will be eligible for tax rebate u/s 87A i.e tax liability will be nil of such individual in both – New and old/existing tax regimes.
Basic exemption limit for NRIs is of Rs 2.5 Lakh irrespective of age.
Additional Health and Education cess at the rate of 4 % will be added to the income tax liability in all cases.
Surcharge applicable as per tax rates below in all categories mentioned above:
10% of Income tax if total income > Rs.50 lakh
15% of Income tax if total income > Rs.1 crore
25% of Income tax if total income > Rs.2 crore
37% of Income tax if total income > Rs.5 crore
NOTE:
Income tax exemption limit is up to Rs 2,50,000 for Individuals , HUF below 60 years aged and NRIs.
An additional 4% Health & education cess will be applicable on the tax amount calculated as above.
Surcharge:
10% of income tax, where total income exceeds Rs. 50 lakh up to Rs. 1 crore.
15% of income tax, where the total income exceeds Rs. 1 crore.
NOTE:
Income tax exemption limit is up to Rs. 3,00,000 for senior citizen aged above 60 years but less than 80 years.
An additional 4% Health & education cess will be applicable on the tax amount calculated as above
Surcharge applicability::
10% of income tax, where total income exceeds Rs.50 lakh up to Rs.1 crore.
15% of income tax, where the total income exceeds Rs.1 crore.
NOTE:
Income tax exemption limit is up to Rs. 5,00,000 for super senior citizen aged above 80 years.
An additional 4% Health & education cess will be applicable on the tax amount calculated as above.
Surcharge applicability::
10% of income tax, where total income exceeds Rs.50 lakh up to Rs.1 crore.
15% of income tax, where the total income exceeds Rs.1 crore.
*Please refer to the new sections for checking the applicability for above concessional income tax rates.
Additional Health and Education cess at the rate of 4 % will be added to the income tax liability in all cases.
A partnership firm/ LLP is taxable at 30%.
NOTE:
Income tax exemption limit is up to Rs.2,50,000 for Individuals , HUF below 60 years aged and NRIs.
An additional 4% Health & education cess will be applicable on the tax amount calculated as above.
Surcharge:
– 15% of income tax, where the total income exceeds Rs.1 crore.
NOTE:
Income tax exemption limit is up to Rs. 3,00,000 for senior citizen aged above 60 years but less than 80 years.
An additional 4% Health & education cess will be applicable on the tax amount calculated as above.
Surcharge applicability:
NOTE:
Income tax exemption limit is up to Rs. 5,00,000 for super senior citizen aged above 80 years.
An additional 4% Health & education cess will be applicable on the tax amount calculated as above.
Surcharge applicability:
NOTE:
In addition cess and surcharge is levied as follows: Cess: 4% of corporate tax
Surcharge applicability:
– Taxable income is more than 10Cr. :12%
NOTE:
An additional 4% Health & education cess will be applicable on the tax amount calculated as above.
Surcharge applicability:
– 15% of income tax, where the total income exceeds Rs.1 crore.
Invest Now & Save Upto ₹ 46,800 on Taxes
NOTE:
An additional 4% Health & education cess will be applicable on the tax amount calculated as above.
Surcharge applicability:
– 15% of income tax, where the total income exceeds Rs.1 crore. Invest Now & Save Upto ₹ 46,800 on Taxes
NOTE:
An additional 4% Health & education cess will be applicable on the tax amount calculated as above.
Surcharge applicability:
– 5% of income tax, where the total income exceeds Rs.1 crore
Invest Now & Save Upto ₹ 46,800 on Taxes
NOTE:
In addition cess and surcharge is levied as follows: Cess: 4% of corporate tax.
Surcharge applicability:
– Taxable income is more than 10Cr. :12%
NOTE:
An additional 4% Health & education cess will be applicable on the tax amount calculated as above.
Surcharge applicability:
– 15% of income tax, where the total income exceeds Rs.1 crore.
Invest Now & Save Upto ₹ 46,800 on Taxes
NOTE:
An additional 4% Health & education cess will be applicable on the tax amount calculated as above
Surcharge applicability:
– 15% of income tax, where the total income exceeds Rs.1 crore.
Invest Now & Save Upto ₹ 46,800 on Taxes
NOTE:
An additional 4% Health & education cess will be applicable on the tax amount calculated as above.
Surcharge applicability:
– 5% of income tax, where the total income exceeds Rs.1 crore
Invest Now & Save Upto ₹ 46,800 on Taxes
NOTE:
In addition cess and surcharge is levied as follows: Cess: 4% of corporate tax.
Surcharge applicability:
– Taxable income is more than 10Cr. :12%
Shyam has a total taxable income of Rs 8,00,000. This income has been calculated by including income from all sources such as salary, rental income, and interest income. Deductions under section 80 have also been reduced. Rohit wants to know his tax dues for FY 2018-119 (AY 2019-2019).
*Please note that Shyam is an individual taxpayer assessee having an income tax exemption of Rs 2,50,000. For other taxpayers assessee i.e senior citizens and super senir citizens, the Income tax limit for availing the exemption would be Rs 3,00,000 & Rs 5,00,000 respectively.
