Income Tax Slab Rates, we all are aware of this word, and I won’t be wrong if I will say that, our thoughts roam around this word, correct, I guess. Actually, it’s obvious for us to be very much information about the “Income Tax Slab Rate” because we have to pay the taxes to the Government of India according to this.
Actually, the Government of India “GOI” in the year 2020 to lessen the burden on common taxpayers introduced a new tax regime with a lower slab rate. This move was intended to provide relief to the taxpayers and increase their net disposable income to boost overall demand. So, after the introduction of this, the taxpayers have below mentioned two options according to which they could choose to pay taxes.
1) Exercise the old tax regime and pay taxes as per the below-mentioned rate: –
| Old Tax Regime | |
| Particular Rate | |
| Individual | |
| Upto 2,50,000 | Nil |
| 2,50,001 to 5,00,000 | 5% |
| 5,00,001 to 10,00,000 | 20% |
| 2,50,000 | 30% |
| Senior Citizen (60<Age<80) | Rate |
| Upto 3,00,000 | Nil |
| 3,00,001 to 5,00,000 | 5% |
| 5,00,001 to 10,00,000 | 20% |
| 10,00,000 | 30% |
| Super Senior Citizen (Age >80) | Rate |
| Upto 5,00,000 | Nil |
| 5,00,001 to 10,00,00 | 20% |
| 10,00,001 | 30% |
Under the old income tax slab, rates are different for Individual, Senior Citizen, and Super Senior Citizen. The advantageous thing attached to this existing tax regime is deduction and exemption under the Income Tax Act, 1961 which can be availed by the taxpayers from their taxable income.
2) Exercise the new slab rate and pay taxes as per below mentioned rate: –
| New Tax Regime | |
| Particular Rate | |
| Applicable for every Individual/ HUF | |
| Upto 2,50,000 | Nil |
| 2,50,001 to 5,00,000 | 5% |
| 5,00,001 to 7,50,000 | 10% |
| 7,50,001 to 10,00,000 | 15% |
| 10,00,001 to 12,50,000 | 20% |
| 12,50,001 to 15,00,000 | 25% |
| 15,00,000 | 30% |
At the time of declaring the new tax regime, GOI expected higher acceptance of the same among taxpayers but that didn’t happen, due to confusion with regard to “what to choose”?
Actually, in the new tax regime, the slab rate is similar for all categories of the assessee, but still, public acceptance is not very high in this. At first instance, you might think that, if the new income tax regime has a lower tax rate, then why it did not pick up the way it was anticipated?
Because, in the new tax regime tax rate is the same for all category of person and definitely lower, but the taxpayers would not be able to claim any deduction under the Income Tax Act except deduction under section 80CCD(2) “ Employer Contribution on account of the employee in notified pension scheme” and section 80JJAA (“New Employment”).
So, the taxpayer is really in a dilemma now that which option, they should exercise?
To make you understand in a better manner, I am giving you three examples here below. In these examples we are calculating tax liability by applying both the regime.
Ex: – 1) Aman who is 45-year-old having gross annual income of 15,00,000. Eligible exemption which he can claim amounted to Lets calculate tax liability on him by using both the tax regime.
| Old Tax Regime Amount | |
| Particular | Amount ( |
| Gross Total Income | 15,00,000 |
| Less: -Deduction | 2,50,000 |
| Taxable Income | 12,50,000 |
| Tax Payable
2,50,000 to – 12,500 ,00,001 to – 1,00,000 – 75,000 |
1,87,500 |
| Cess | 7,500 |
| Total tax Payable | 1,95,000 |
–
| New Tax Regime | |
| Particular | Amount ( |
| Gross Total Income | 15,00,000 |
| Les: – Deduction | 0 |
| Taxable Income | 15,00,000 |
| Tax Payable
2,50,000 to – 12,500 ,00,001 to – 25,000 ,50,001 to -37,500 ,00,001 to -50,000 ,50,001 to -62,500 |
1,87,500 |
| Cess | 7,500 |
| Total Tax Payable | 1,95,000 |
Ex: – 2) An Individual is 45-year-old having gross annual income of 13,50,000. Eligible exemption which he can claim is amount to Let’s calculate tax liability on him by using both the tax regime.
| Old Tax Regime | |
| Particular | Amount ( |
| Gross Total Income | 13,50,000 |
| Less: -Deduction | 2,50,000 |
| Taxable Income | 11,00,000 |
| Tax Payable
2,50,000 to – 12,500 ,00,001 to – 1,00,000 – 30,000 |
1,42,500 |
| Cess | 5,700 |
| Total Tax Payable | 1,48,200 |
–
| New Tax Regime | |
| Particular | Amount ( |
| Gross Total Income | 13,50,000 |
| Les: – Deduction | 0 |
| Taxable Income | 13,50,000 |
| Tax Payable
2,50,000 to – 12,500 ,00,001 to – 25,000 ,50,001 to -37,500 ,00,001 to -50,000 ,50,001 to -62,500 |
1,50,000 |
| Cess | 6,000 |
| Total Tax Payable | 1,56,000 |
Ex: – 3) An Individual who is 45-year-old having gross annual income of 18,50,000. Eligible exemption which he can claim is amount to Let’s calculate tax liability on him by using both the tax regime.
| Old Tax Regime | |
| Particular | Amount ( |
| Gross Total Income | 18,50,000 |
| Less: -Deduction | 2,50,000 |
| Taxable Income | 16,00,000 |
| Tax Payable
2,50,000 to – 12,500 ,00,001 to – 1,00,000 – 180,000 |
2,92,500 |
| Cess | 11,700 |
| Total Tax Payable | 3,04,200 |
–
| New Tax Regime | |
| Particular | Amount ( |
| Gross Total Income | 18,50,000 |
| Les: – Deduction | 0 |
| Taxable Income | 18,50,000 |
| Tax Payable
2,50,000 to – 12,500 ,00,001 to – 25,000 ,50,001 to -37,500 ,00,001 to -50,000 ,50,001 to -62,500 ,00,001 to -62,500 – 1,05,000 |
2,92,500 |
| Cess | 11,700 |
| Total Tax Payable | 3,04,200 |
With the above examples, we analyzed that, if the income of an individual is below ₹15,00,000, he should opt for the old tax regime. Whereas, if the income of an individual is 15,00,000 or > 15,00,000 then he would be at break-even point by applying both the tax regime.
Though, In the cases, where an individual has Business Income, the option once exercised shall be applicable for all subsequent years. whereas the individual who has no Business Income, the option shall be exercised for every year.
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