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What are the Income Tax Slab & Rates for 2020-2021?

Income Tax is levied on individual taxpayers based on the tax slab system. The tax slab provides the rate of income tax based on the different ranges of income. Therefore, the income tax increases with an increase in the total income. The government introduced it to ensure a progressive and fair tax system. The income tax slab is subject to revision based on any provision if detailed predominantly in the financial year's budget.

 

The Finance Minister introduced a new tax slab in the Union Budget, 2020 for the financial year 2020-2021, which is the income tax slab for AY 2021-22. Here is a detail about it for your reference.

 

What is the Income Tax Slab?
 

The income tax slab refers to the range of income and forms the basis for the applicability of the tax rate. The income tax rate also varies based on the category of taxpayers.
 

  1. Resident and non-resident individuals less than 60 years of age.
  2. Resident senior citizens between 60 and 80 years of age.
  3. Resident super senior citizens more than 80 years of age.

 

The New Tax Regime for FY 2020-21
 

The new tax regime provides lesser rates and is the same for all the different categories of taxpayers, i.e., the individuals and HUF. However, it does not allow for the major tax* deductions and exemptions. Here is a detail of the new income tax slab and the rates for FY 2020-21.

 

Income Tax Slab(₹)

Income Tax Slab Rates for FY 2020-21(%)

Upto ₹2.5 Lakh

Nil

Between ₹2.5 Lakh and ₹5 Lakh

5%

Between ₹5 Lakh and ₹7.5 Lakh

10%

Between ₹7.5 Lakh and ₹10 Lakh

15%

Between ₹10 Lakh and ₹12.5 Lakh

20%

Between ₹12.5 Lakh and ₹15 Lakh

25%

Greater than ₹15 Lakh

30%

 

Health and Education Cess is applicable on the income tax liability at 4% on the income tax liability.

 

The surcharge is applicable at the following rates:
 

For total income greater than ₹50 Lakh

10%

For total income greater than ₹1 crore

15%

For total income greater than ₹2 crore

25%

For total income greater than ₹3 crores

37%

 

It is important to note that the new regime does not consider major tax* deductions and exemptions that are applicable as per the old regime. There are 70 deductions and exemptions that are not applicable, and some of the prominent ones include:
 

  1. House Rent Allowance
  2. Leave Travel Allowance
  3. Professional Tax
  4. Deductions under Section 80C, 80D, etc.,
  5. Interest on housing loans

 

Some of the deductions permitted under the new regime include:
 

  1. Investment in the National Pension Scheme under Section 80CCD(2).
  2. Transport allowance for differently-abled people
  3. Conveyance allowance incurred for the expenditure related to work
     
How is the New Regime Income Tax Slab Different from the Old Regime?
 

 

The old regime provides the tax slab system that varies based on the category of taxpayers.

 

Income tax slab for individuals below 60 years of age and HUF

 

Income Tax Slab(₹)

Income Tax Slab Rates

Upto ₹2.5 Lakh

Nil

Between ₹2.5 Lakh and ₹5 Lakh

5%

Between ₹5 Lakh and ₹10 Lakh

20%

Greater than ₹10 Lakh

30%

 

Income tax slab for individuals between 60 and 80 years of age

 

Income Tax Slab(₹)

Income Tax Slab Rates(%)

Upto ₹3 Lakh

Nil

Between ₹3 Lakh and ₹5 Lakh

5%

Between ₹5 Lakh and ₹10 Lakh

20%

Greater than ₹10 Lakh

30%

 

Income tax slab for individuals above 80 years of age

 

Income Tax Slab(₹)

Income Tax Slab Rates(%)

Upto ₹5 Lakh

Nil

Between ₹5 Lakh and ₹10 Lakh

20%

Greater than ₹10 Lakh

30%

 

 

An additional 4% Health and Education Cess is applicable. And, the surcharge is applicable at 10% if the total income is between 50 Lakh and one crore and 15% of the income tax if the total income exceeds one crore.

 

Example
 

Consider an example with a person having the following particulars:

 

Total Income

₹13,50,000

Saving in a term insurance policy

₹1,50,000

Saving in a health insurance plan for self and family

₹75,000

 

Let us calculate the tax payable based on the new regime and old regime.

 

Particulars

Old Regime(₹)

New Regime(₹)

Gross total income

₹13,50,000

₹13,50,000

Less Deductions under Section 80C(Premium paid on term insurance plan)

₹1,50,000

Nil

Less Deductions under Section 80D(Premium paid on health insurance for family)

₹75,000

Nil

Taxable Income

₹1125000

₹1350000

 

 

 

Income Tax as per the slab rates

 

Income Tax Slab(₹)

Old Regime(₹)

Up to ₹2.5 Lakh

Nil

Between ₹2.5 Lakh and ₹5 Lakh

₹12500

Between ₹5 Lakh and ₹10 Lakh

₹100000

Greater than ₹10 Lakh

₹37500

Income Tax payable

₹150000

 

Income Tax Slab(₹)

New Regime(₹)

Up to ₹2.5 Lakh

Nil

Between ₹2.5 Lakh and ₹5 Lakh

₹12500

Between ₹5 Lakh and ₹7.5 Lakh

₹25000

Between ₹7.5 Lakh and ₹10 Lakh

₹37500

Between ₹10 Lakh and ₹12.5 Lakh

₹50000

Between ₹12.5 Lakh and ₹15 Lakh

₹25000

Income Tax payable

₹150000

 

 

Therefore, if you plan to make investments in financial products to secure your life while saving tax, then the old regime tax slab is profitable. On the other hand, if you belong to the middle-income group without enough investments, the new regime with decreased slab rates introduced for the FY 2020-21 will seem beneficial.

 

 

Conclusion
 

Income Tax slab rates are subject to revision by the government. The Financial Budget 2020 introduced a new tax regime with different income slabs and rates for the taxpayer. It is a beneficial option for a person belonging to the middle-income group and not having many investments!

 

L&C/Advt/2022/Dec/3259

 

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Tata AIA Life Insurance

A joint venture between Tata Sons Pvt. Ltd. and AIA Group Ltd. (AIA),  Tata AIA Life Insurance  is one of the leading life insurance providers in India. We post everything you need to know about life insurance, tax savings and a variety of lateral topics such as savings and investments in this space. You can access and read a host of different blogs, articles and pages at the Tata AIA Life Insurance Knowledge Center or get in touch with us with any queries or questions!

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Disclaimer

  • Insurance cover is available under the product.
  • The products are underwritten by Tata AIA Life Insurance Company Ltd.
  • The plans are not a guaranteed issuance plan, and it will be subject to Company’s underwriting and acceptance.
  • For more details on risk factors, terms and conditions please read the sales brochure carefully before concluding a sale.
  • This blog is for information and illustrative purposes only and does not purport to any financial or investment services and do not offer or form part of any offer or recommendation. The information is not and should not be regarded as investment advice or as a recommendation regarding any particular security or course of action.
  • Please know the associated risks and the applicable charges, from your Insurance agent or the Intermediary or policy document issued by the insurance company.
  • Every effort is made to ensure that all information contained in this blog is accurate at the date of publication, however, the Tata AIA Life shall not have any liability for any damages of any kind (including but not limited to errors and omissions) whatsoever relating to this material.
  • *Income Tax benefits would be available as per the prevailing income tax laws, subject to fulfilment of conditions stipulated therein. Income Tax laws are subject to change from time to time. Tata AIA Life Insurance Company Ltd. does not assume responsibility on tax implications mentioned anywhere in this document. Please consult your own tax consultant to know the tax benefits available to you.