Income Tax in India is imposed and collected by the Union Government of India. In India, tax on individual taxpayers are levied on the basis of a slab system.

Slab rates are different for different categories of Income Tax taxpayers. The Income Tax Act, 1961 has divided individual taxpayers into three categories based on their Age. The description of categories are as follows:

  • Individuals (aged less than 60 years) including residents and non-residents
  • Resident Senior Citizens (aged between 60 to 80 years)
  • Resident Super Senior Citizens (aged more than 80 years)

Tax Slab Rates for all the three categories :

Income Tax Slab Existing Regime Slab Rates for FY 20-21 New Regime Slab Rates for FY 20-21
Resident Individuals < 60 years of age & NRIs Resident Individuals > 60 to < 80 years Resident Individuals > 80 years Applicable for All Individuals
Rs 0.0 – Rs 2.5 Lakhs NIL NIL NIL NIL
Rs 2.5 – Rs 3.00 Lakhs 5% (tax rebate u/s 87a is available) NIL NIL 5% (tax rebate u/s 87a is available)
Rs. 3.00- Rs 5.00 Lakhs 5% (tax rebate u/s 87a is available) NIL
Rs. 5.00 – Rs 7.5 Lakhs 20% 20% 20% 10%
Rs 7.5 – Rs 10.00 Lakhs 20% 20% 20% 15%
Rs 10.00 – Rs. 12.50 Lakhs 30% 30% 30% 20%
Rs. 12.5 – Rs. 15.00 Lakhs 30% 30% 30% 25%
> Rs. 15 Lakhs 30% 30% 30% 30%

Conditions for opting New Tax regime

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.

Some common Exemptions and deductions “ not allowed” under New Tax rate regime

1. Leave Travel Allowance

2. House Rent Allowance

3. Conveyance allowance

4. Relocation allowance

5. Children education allowance

6. Standard deduction on salary

7. Professional tax

8. Interest on housing loan (Section 24)

9. Deduction under Chapter VI-A deduction (80C,80D, 80E and so on) (Except Section 80CCD(2) and section 80JJAA.

Deductions “allowed” under new Tax rate regime

1. Transport allowance for specially abled people

2. Conveyance allowance for expenditure incurred for travelling to work

3. Depreciation u/s 32 of the Income-tax act except additional depreciation.

4. Any allowance for travelling for employment or on transfer

Old Tax regime Vs New Tax regime – which is better?

The new income tax regime is beneficial for people who make low investments. As the new regime offers several 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.

However, if you are already making investments in tax-saving instruments; life insurance policies; making payments of children’s tuition fees; buying a house with a home loan etc. the old regime helps you with higher tax deductions and lower tax payments.

Time of Selection of option of old vs new regime?

Nature of Income Time of Selection of option of old vs new regime
Income from Salary or any other head of income attracting TDS An employee can opt to choose for the new tax regime and intimate their employer at the beginning of FY 2020-21 . Employees can change the option of selecting the tax regime every year

However if new tax slab regime is opted at the begninng of the year, it cannot be changed anytime during the year for TDS purpose, however the option can be changed at the time of filing of Income-tax return.

Income from Business & Profession In case of Business or profession income , the option to choose between the tax regimes is available only once for a particular business.

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May 2021