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Introduction
Income tax in India is a tax based on your income (and profit, in the case of companies) that you pay to the Government. The Government uses this tax money for various purposes including, public services, infrastructure development, defence spending and subsidies. If you earn income beyond a certain limit, paying income tax is obligatory each year.
The Finance Minister of India tables a Finance Bill annually proposing reforms to direct and indirect taxes. Once both Houses of the parliament pass the bill, the President approves it and it becomes the Finance Act. Such changes will become part of the Income Tax Act, usually from the first day of the next financial year.
The Finance Act consists of four parts:
Part I: Determines the rate at which income tax is imposed on various types of income during a financial year.
Part II: It determines the rate at which tax at source will be deducted during the financial year.
Part III: It points out the increases in income tax rates, i.e. the rate of taxes paid under the head of salary and the rate of advance tax assessment for a financial year.
Part IV: It explains the rules in this section for calculating agricultural profits.
About Income Tax Slabs
- What is Income Tax Slab Rates?
- Surcharge on Income Tax
- Special Income Tax Rate for Individuals and HUFs for FY 2020-21
- Income Tax Slabs for Partnership Firms
- Income Tax Slabs for Local Authorities
- Income Tax Slabs for Domestic Companies
- Income Tax Slabs for Foreign Companies
- Income Tax Slabs for Co-operative Societies
- Special tax rates applicable to Co-operative societies
- FAQs
What is Income Tax Slab Rates?
Under the Income Tax Act, 1961 – the proportion of tax owed to the government is based on the amount of income an individual received over the course of a year.
Considering that the tax burden is higher for people with lower wages – in India, the tax rate is higher for those making higher income in a financial year. This is achieved by applying a specific tax rate for different annual income amounts. Those slabs are tweaked in annual budget announcements by the government.
Income Tax Slabs for the Financial Year 2019-20 & Assessment Year 2020 – 21
In case of an Individual (resident or non-resident) or HUF or Association of Person or Body of Individual or any other artificial juridical person
Individuals (Other than senior and super senior citizen) | ||
Net Income Range | Rate of Income-tax | |
Assessment Year 2021-22 | Assessment Year 2020-21 | |
Up to Rs. 2,50,000 | - | - |
Rs. 2,50,000 to Rs. 5,00,000 | 5% | 5% |
Rs. 5,00,000 to Rs. 10,00,000 | 20% | 20% |
Above Rs. 10,00,000 | 30% | 30% |
Senior Citizens - (who are 60 years or more at any time during the previous year) | ||
Net Income Range | Rate of Income-tax | |
Assessment Year 2021-22 | Assessment Year 2020-21 | |
Up to Rs. 3,00,000 | - | - |
Rs. 3,00,000 to Rs. 5,00,000 | 5% | 5% |
Rs. 5,00,000 to Rs. 10,00,000 | 20% | 20% |
Above Rs. 10,00,000 | 30% | 30% |
Super Senior Citizens - (who are 80 years or more at any time during the previous year) | ||
Net Income Range | Rate of Income-tax | |
Assessment Year 2021-22 | Assessment Year 2020-21 | |
Up to Rs. 5,00,000 | - | - |
Rs. 5,00,000 to Rs. 10,00,000 | 20% | 20% |
Above Rs. 10,00,000 | 30% | 30% |
Hindu Undivided Family (Including AOP, BOI and Artificial Juridical Person) | ||
Net Income Range | Rate of Income-tax | |
Assessment Year 2021-22 | Assessment Year 2020-21 | |
Up to Rs. 2,50,000 | - | - |
Rs. 2,50,000 to Rs. 5,00,000 | 5% | 5% |
Rs. 5,00,000 to Rs. 10,00,000 | 20% | 20% |
Above Rs. 10,00,000 | 30% | 30% |
Surcharge on Income Tax
Surcharge is the amount levied on your income tax amount at following rates if total income of an assessee exceeds specified limits:
Rate of Surcharge | ||
Range of Income | Assessment Year 2021-22 | Assessment Year 2020-21 |
Rs. 50 Lakhs to Rs. 1 Crore | 10% | 10% |
Rs. 1 Crore to Rs. 2 Crores | 15% | 15% |
Rs. 2 Crores to Rs. 5 Crores | 25% | 25% |
Rs. 5 crores to Rs. 10 Crores | 37% | 37% |
Exceeding Rs. 10 Crores | 37% | 37% |
Health and Education Cess: Health and Education Cess is levied at the rate of 4% on the amount of income-tax plus surcharge.
Note: A resident individual (whose net income does not exceed Rs. 5,00,000) can avail rebate under section 87A. It is deductible from income-tax before calculating education cess. The amount of rebate is 100 percent of income-tax or Rs. 12,500, whichever is less.
Special Income Tax Rate for Individuals and HUFs for FY 2020-21
In the budget session of February 2020, the Finance Minister announced a special, reduced Income Tax rate for individuals and HUFs who do not wish to claim any rebates for their Income Tax.
Total Income (Rs) | Rate |
Up to 2,50,000 | Nil |
From 2,50,001 to 5,00,000 | 5% |
From 5,00,001 to 7,50,000 | 10% |
From 7,50,001 to 10,00,000 | 15% |
From 10,00,001 to 12,50,000 | 20% |
From 12,50,001 to 15,00,000 | 25% |
Above 15,00,000 | 30% |
Surcharge on Special Income Tax Rates
Surcharge is the amount levied on your income tax amount at following rates if total income of an assessee exceeds specified limits:
Income Range | Assessment Year 2021-22 |
Rs. 50 Lakhs to Rs. 1 Crore | 10% |
Rs. 1 Crore to Rs. 2 Crores | 15% |
Rs. 2 Crores to Rs. 5 Crores | 25% |
Rs. 5 crores to Rs. 10 Crores | 37% |
Exceeding Rs. 10 Crores | 37% |
Note:
- The option to pay tax at lower rates shall be available only if the total income of assessee is computed without claiming specified exemptions or deductions.
- A resident individual (whose net income does not exceed Rs. 5,00,000) can avail rebate under section 87A. It is deductible from income-tax before calculating education cess. The amount of rebate is 100 percent of income-tax or Rs. 12,500, whichever is less.
Income Tax Slabs for Partnership Firms
Partnership Firms / Corporations and LLPs (Limited Liability Partnerships) have a flat tax rate and are expected to pay income tax at a rate of 30%.
Added to the tax is:
- Tax surcharge: 12% if the annual income exceeds Rs.1 Crore
- Health & Education cess: It is at a cost of 4% based on the sum of tax plus surcharge.
Income Tax Slabs for Local Authorities
Local authorities are also taxed at a 30% flat tax rate.
Added to the tax is:
- Income surcharge: 12 % if annual income exceeds Rs.1 Crore
- Health & Education cess: It is at a cost of 4% based on the sum of tax plus surcharge.
Income Tax Slabs for Domestic Companies
Domestic Companies received a major boost this year. So the turnover rose from Rs.250 crores to Rs.400 crores for a 25% tax rate. The estimation of turnover slab wise of taxes is:
Turnover Particulars |
|
Gross turnover up to Rs.400 Crores in the previous year | 25% (subject to conditions as set out in the Taxation Laws Amendment Ordinance, 2019) |
Gross turnover exceeding Rs.400 Crores in the previous year | 30% (subject to conditions as set out in the Taxation Laws Amendment Ordinance, 2019) |
Added to the tax amount are:
- Surcharge at 7% in cases where annual income is between Rs.1 Crore to Rs.10 Crore
- Surcharge at 12% in cases where annual income is more than Rs.10 Crore
- Health & Education Cess at a rate of 4% - calculated on tax amount plus surcharge
Special Tax rates applicable to a Domestic Company
Domestic Company |
| |
Assessment Year 2020-21 | Assessment Year 2021-22 | |
Where it opted for section 115BA | 25% | 25% |
Where it opted for Section 115BAA | 22% | 22% |
Where it opted for Section 115BAB | 15% | 15% |
- Surcharge: The surcharge rate for a business that opts for taxability pursuant to Section 115BAA or Section 115BAB shall be 10% flat regardless of the overall profit.
- Health and Education Cess: The sum of income tax and the related surcharge will be further increased by the health and education cess measured at the rate of 4% of such income tax and surcharge.
- MAT: The domestic company which has opted for the special taxation scheme under Section 115BAA & 115BAB is exempt from MAT (Minimum Alternate Tax) provision. However, in cases where section 115BA has been selected there is no exception.
Income Tax Slabs for Foreign Companies
Nature of Income | Tax Rate |
Royalty received from Government or an Indian concern in pursuance of an agreement made with the Indian concern after March 31, 1961, but before April 1, 1976, or fees for rendering technical services in pursuance of an agreement made after February 29, 1964 but before April 1, 1976 and where such agreement has, in either case, been approved by the Central Government | 50% |
Any other income | 40% |
Added to the tax amount are:
- Surcharge of 2% in cases where annual income is between Rs.1 Crore to Rs.10 Crore
- Surcharge of 5% in cases where annual income is more than Rs.10 Crore
- Health & Education Cess at a rate of 4% - calculated on tax amount plus surcharge
Income Tax Slabs for Co-operative Societies
Up to Rs.10,000 | 10% of Income |
Rs.10,000 to Rs.20,000 | 20% of Income exceeding Rs.10,000 |
Over Rs.20,000 | 30% of Income exceeding Rs.20,000 |
Added to the tax amount are:
- Surcharge of 12% in cases where annual income is more than Rs.1 Crore
- Health & Education Cess at the rate of 4% - calculated on tax amount plus surcharge
Special tax rates applicable to Co-operative societies
The Finance Act, 2020 incorporated a new Section 115BAD in the Income-Tax Act to provide the cooperative societies with an option to be taxed at a rate of 22% plus 10% surcharge and 4% cess. Resident cooperative societies have an opportunity to opt for taxation under the new Act w.e.f. Assessment Year 2021-22 section 115BAD. If exercised under this clause, the right cannot be revoked subsequently for the same year or any other prior year.
If a cooperative society opts for the new Section 115BAD law, its revenue shall be measured without providing for a defined exception, deduction or benefit available under the Act. The societies that opted for this section are held out of Alternative Minimum Tax (AMT) purview. Furthermore, the provisions relating to the calculation, forwarding and set-off of AMT credit shall not apply to these assessed persons
The option of paying tax at lower rates shall only be available if the total income of the cooperative society is calculated without demanding any exemptions or deductions
Assessment Year 2021-22 | |
Taxable income | Tax Rate |
Any income | 22% |
End Note: Income Tax is calculated based on the income earned during the year. The Finance Act determines the tax for every income bracket. Taxes are deducted at source based on this tax slab. Individuals should consult this tax slab while filing their income tax returns.
FAQs
1. Are the Tax Slab rates different for men and women?
No longer. But, there were different slabs for men and women earlier. For example, the basic exemption limit for men aged up to 65 years was Rs. 1.6 lakh per annum for FY 2010-11, while women aged up to 65 years had a higher basic exemption limit of Rs. 1.9 lakh. As for FY 2018-19, that is not the case anymore.
2. How does the government collect the taxes?
The government raises taxes by three means:
- Voluntary payment through designated banks by taxpayers. For example, the taxpayers pay advance tax and self-assessment tax.
- Taxes deducted at source [TDS] from the income of the receiver
- Taxes collected at source [TCS]
3. What is the time period considered for the purpose of income tax?
Income-tax is based on a person's annual taxable income. The year under the Income-Tax Law is the period beginning on April 1st and ending on March 31st of next calendar year.
4. Is the due date for filing tax returns the same for all taxpayers?
No, not all taxpayers have the same due date. The due date for individual taxpayers is July 31st of the assessment year. However, for FY 2019-20, the due date to file income tax returns is extended till November 30th, 2020.
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