At the end of every financial year, we are mandated to prepare for filing the income tax return based on the income tax paid during the year. But, seldom do we know about the income tax and its framework! Here is a detail about the income tax slab, which forms the basis for calculating income tax in India.

Income tax in India is a type of direct tax levied by the Government on the income earned from different sources by the individuals, HUFs (Hindu Undivided Family), Corporates and Limited Liability Partnerships. It is based on the tax provisions detailed in the Income Tax Act of India.

The Government utilises the collected amount to fund infrastructure initiatives, pay salaries to the employees working under the State and the Central Government, etc. Therefore, paying income tax is an important responsibility for every individual or entity earning an income.

The income tax is levied on the income based on the tax slabs in India. It is defined to make sure paying income tax is affordable for different sections of people based on their range of income.

 What Is an Income Tax Slab?

The income tax slab defines the ranges of income for the different categories of people and the applicable income tax. Therefore, the income tax rates will increase with an increase in income. The income here refers to the taxable income, calculated after considering the applicable deductions and exemptions based on the gross income and tax provisions as stated under the Income Tax Act, 1961.

The Government introduced such a progressive income tax framework to ensure a fair income tax system in India. The income tax slabs in India are subject to revision based on the amendments detailed in the Union Budget every year.

The IT tax slab provides the tax rate separately for the following different categories of taxpayers, as detailed below.

1. Individuals, residents and non-residents less than 60 years of age.
2. Senior citizens, residents between 60 and 80 years of age.
3. Super senior citizens, residents above 80 years of age.
   
   

There is a minimum threshold on the income above which the income tax slab 2021 gets applicable. Therefore, taxpayers must be aware of the exemption limit to apply the appropriate tax rate.

In the Union Budget, 2020, the Finance Minister introduced a new tax slab regime. It has revised income tax rates for the different ranges of income based on the categories of taxpayers.

In the subsequent Union Budgets, the Finance Minister made no further changes to the income tax slab for AY 2021-22 and FY 2021-22. However, the Budget 2020-21 mentioned that senior citizens above 75 years of age are exempt from filing ITR if their only source of income is pension and interest income.

Income Tax Slab Rates for Financial Year 2021-22 (AY 2022-23)

Every individual taxpayer can choose between the old and the new tax slab. So how do the ITR slabs differ, and why is it left to the choice of individual taxpayers?

The old tax regime details a higher income tax rate but allows for a range of deductions and exemptions under the Income Tax Act, 1961, for the calculation of the taxable income. On the other hand, the new income tax slab provides lower tax rates for the different ranges of income while giving up certain deductions and exemptions. The new taxable income slab has widened the scope of the taxation scheme by introducing seven tax slab rates.

Choosing the ITR slab based on the regime is optional for the individual resident taxpayers because the benefits under both regimes differ based on the sources and extent of income and the investment scenarios.

1. Taxpayers who have made tax-saving investments such as the life insurance, Equity Linked Savings Scheme, etc., can benefit from the applicable deductions and exemptions to reduce the taxable income and the corresponding tax slab rate of the old tax regime.
2. Taxpayers who have not made any investments through the financial year or have invested in non-tax saving investments can pay reduced tax rates based on their income and applicable tax rates of the new income tax slab.

However, it is observed that as the income reaches a higher IT tax slab, the new tax regime gets more beneficial even in the presence of tax^~-saving investments.

The New Income Tax Slab for The FY 2021-22(AY 2022-23)

The new income tax slab 2021-22 is not different for the different categories of taxpayers. For example, it is the same for the individuals and HUFs less than 60 years, senior citizens between 60 and 80 years of age and super senior citizens greater than 80 years of age.

Income Tax Slabs(₹)	Income Tax Slab Rates for FY 2021-22
Upto ₹2.5 Lakhs	Nil
Between ₹2.5 lakhs and ₹5 lakhs	5%
Between ₹5 lakhs and ₹7.5 lakhs	10%
Between ₹7.5 lakhs and ₹10 lakhs	15%
Between ₹10 lakhs and ₹12.5 lakhs	20%
Between ₹12.5 lakhs and ₹15 lakhs	25%
Greater than ₹15 lakhs	30%

 

Cess And Surcharge

Health and education cess will apply to the income tax liability at 4%.

The surcharge will apply based on the following rates:

Income (₹)	Rate of Surcharge
Between ₹50 lakhs and ₹1 crore	10%
Between ₹1 crore and ₹2 crores	15%
Between ₹2 crore and ₹5 crores	25%
Greater than ₹5 crores	37%

The new income tax slab does not allow for including about 70 different deductions and exemptions such as the deductions under Section 80C, 80D, etc., interest on housing loans, house rent allowance, leave travel allowance, etc.,

The Old Income Tax Slab for The FY 2021-22(AY 2022-23)

The old tax slab will vary based on the age and the category of taxpayers.

 

Cess And Surcharge

 

Health and education cess will apply to the income tax liability at 4%.

The surcharge will apply based on the following rates:

Income (₹)	Rate of Surcharge
Between ₹50 lakhs and ₹1 crore	10%
Greater than ₹1 crores	15%

For both the new and the old tax regimes, individuals with taxable income less than or equal to ₹5 lakhs will qualify for a tax rebate based on Section 87A. The tax liability will be nil in such cases.

Income Tax Slab for Women

The income tax slab 2021-22 for women is the same as that of men. Here is a detail for your reference.

Income Tax Slabs	Old Tax Slab Regime - Applicable Tax Rates for FY 2021-22(AY 2022-23)			New Tax Slab Regime - Applicable Tax Rates for FY 2021-22(AY 2022-23)
	Individuals and HUF less than 60 years of age	Individuals and HUF between 60 and 80 years of age	Individuals and HUF above 80 years of age
Upto ₹2.5 Lakhs	Nil	Nil	Nil	Nil
Between ₹2.5 lakhs and ₹3 lakhs	5%	Nil	Nil	5%
Between ₹3 lakhs and ₹5 lakhs	5%	5%	Nil	5%
Between ₹5 lakhs and ₹7.5 lakhs	20%	20%	20%	10%
Between ₹7.5 lakhs and ₹10 lakhs	20%	20%	20%	15%
Between ₹10 lakhs and ₹12.5 lakhs	30%	30%	30%	20%
Between ₹12.5 lakhs and ₹15 lakhs	30%	30%	30%	25%
Greater than ₹15 lakhs	30%	30%	30%	30%

 

Cess And Surcharge

Health and education cess will apply to the income tax liability at 4%.

The surcharge will apply based on the following rates:

Income (₹)	Rate of Surcharge (Old Tax Slab Regime)	Rate of Surcharge (New Tax Slab Regime)
Between ₹50 lakhs and ₹1 crore	10%	10%
Between ₹1 crore and ₹2 crores	15%	15%
Between ₹2 crores and ₹5 crores	15%	25%
Greater than ₹5 crores	15%	37%

 

Is Switching Between the Tax Slabs Allowed Every Consecutive Year?

Switching between the tax slabs in India is applicable based on the sources of income.

• If the income is earned from a profession or business, the new income tax slab rates opted for shall apply for the consecutive years once chosen. Switching back to the old tax regime is allowed once in their life till they earn income from the business or the profession.
  
  
• If the income is not earned from a business or profession, the option to choose the IT tax slab can be exercised by the taxpayer every year. The employer will deduct the taxes for salaried individuals before paying the salary. The employee, who is the taxpayer, can intimate on the choice of the salary tax slab at the beginning of the financial year and change it at the end if desired. For example, suppose the taxpayer has chosen the new income tax slab at the beginning of the year and makes a couple of investments during the year. In that case, he can opt for the old tax slab to utilise the tax deduction and exemption benefits while filing the ITR.
  
  

How to Calculate Income Tax Using IT Slabs?

Calculating income tax based on the Income Tax Slabs in India is a simple procedure. Here are two different examples to describe the income tax calculation based on the old and new regimes.

Example 1: Total income less than ₹10 lakhs for salaried individuals

Let us consider a taxpayer having the following particulars.

Total taxable Income	₹7,50,000
Tax saving investments	₹1,00,000

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

Basic Particulars	Old Regime(₹)	New Regime(₹)
Gross total income	₹7,50,000	₹7,50,000
Standard deduction*	₹50,000	Nil
Less Deductions under Section 80C	₹1,00,000	Nil
Taxable Income	₹6,00,000	₹7,50,000

Income Tax as per the slab rates

Income Tax Slab(₹)	Old Regime(₹)		New Regime(₹)
	Calculation	Tax Amount	Calculation	Tax Amount
Up to ₹2.5 lakhs	Nil	-	Nil	-
Between ₹2.5 lakhs and ₹5 lakhs	5%	₹12,500	5%	₹12,500
Between ₹5 lakhs and ₹7.5 lakhs	20% of the income that exceeds ₹5,00,000	₹20,000	10% of the income that exceeds ₹5,00,000	₹25,000
Income Tax payable		₹32,500		₹37,500
Surcharge		-		-
Cess	4%	₹1,300	4%	₹1,500
Total Income Tax payable		₹33,800		₹39,000

 

Example 2: Total income more than ₹10 lakhs for salaried individuals

Let us consider a taxpayer having the following particulars.

Total taxable Income	₹14,50,000
Tax saving investments	₹1,50,000

 

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

Basic Particulars	Old Regime(₹)	New Regime(₹)
Gross total income	₹14,50,000	₹14,50,000
Standard deduction*	₹50,000	Nil
Less Deductions under Section 80C	₹1,50,000	Nil
Taxable Income	₹12,50,000	₹14,50,000

 

Income Tax as per the slab rates

Income Tax Slab(₹)	Old Regime(₹)		New Regime(₹)
	Calculation	Tax Amount	Calculation	Tax Amount
Up to ₹2.5 lakhs	Nil	-	Nil	-
Between ₹2.5 lakhs and ₹5 lakhs	5%	₹12,500	5%	₹12,500
Between ₹5 lakhs and ₹7.5 lakhs	20% of the income that exceeds ₹5,00,000	₹50,000	10% of the income that exceeds ₹5,00,000	₹25,000
Between ₹7.5 lakhs and ₹10 lakhs	20% of the income that exceeds ₹7,50,000	₹50,000	15% of the income that exceeds ₹7,50,000	₹37,500
Between ₹10 lakhs and ₹12.5 lakhs	30% of the income that exceeds ₹10,00,000	₹75,000	20% of the income that exceeds ₹10,00,000	₹50,000
Between ₹12.5 lakhs and ₹15 lakhs	-	-	25% of the income that exceeds ₹10,00,000	₹50,000
Income Tax payable		₹1,87,500		₹1,75,000
Surcharge		-		-
Cess	4%	₹7,500	4%	₹7,000
Total Income Tax payable		₹1,95,000		₹1,82,000

 

Therefore, the higher the consideration of the income tax slab, the greater the benefits of the new tax slab regime. 

*Standard deduction of Rs. 50,000 is only applicable to salaried employees