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.

Author Bio

Qualification: CA in Practice
Company: Rakhi Thakur & Associates
Location: Dwarka, New Delhi, Delhi, India
Member Since: 29 Aug 2020 | Total Posts: 5

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