[ecis2016.org] In this article, we would discuss the various income tax slabs applicable on individual taxpayers in India
What is income tax?
Under income tax laws in India, individuals, Hindu Undivided Families (HUFs), companies, partnership firms and co-operative societies, etc., have to pay a tax on their income once in a year. However, the income tax slab for each category is different. Even within a category, income tax slabs could be different for one entity when compared to the other based on some factors. In this article, we would discuss the various income tax slabs applicable on individual taxpayers in India.
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What is income tax slab?
The rate at which an individual’s income is taxed in India is known as his income tax slab. Income tax slabs are different for individual taxpayers depending on two factor:
Income: The higher the income, the higher the tax slab
Age: The higher the age, the lower the tax slab (only applicable under the old tax regime).
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New tax regime: 115BAC of Income Tax Act
The government, from April 1, 2020 (FY 2020-21), introduced a new tax regime. To enforce this, Section 115BAC was inserted in the Income Tax Act, 1961.
New tax regime
Tax rate slab
| Income | New tax regime slab |
| Up to Rs 2.50 lakhs | Nil |
| From Rs 2.50 lakhs to Rs 5 lakhs | 5% |
| From Rs 5 lakhs to Rs 7.50 lakhs | 10% |
| From Rs 7.5 lakhs to Rs 10 lakhs | 15% |
| From Rs 10 lakhs to Rs 12.50 lakhs | 20% |
| From Rs 12.50 lakhs to Rs 15 lakhs | 25% |
| Above Rs 15 lakhs | 30% |
An additional health and education cess of 4% is applicable on your total tax liability. Apart from this, the individual taxpayer will also have to pay an additional surcharge, if his income exceeds a certain limit.
New tax regime surcharge
10% of income tax if total income is over Rs 50 lakhs.
15% of income tax if total income is over Rs1 crore
25% of income tax if total income is over Rs 2 crores
37% of income tax if total income over Rs 5 crores
New tax regime: Key features
More tax slabs in new income tax regime
Contrary to the old regime which has only four tax slabs, there are seven tax slabs in the new tax regime.
New tax regime means taxpayers have to forgo exemptions/deductions
Meant to simplify the tax calculations, opting for the new tax regime means the taxpayer will have to let go of a total of 70 deductions and exemptions offered under various sections of the Income Tax Act.
These include:
- Standard deduction of Rs 50,000 currently available to salaried taxpayers.
- Deduction for specified investments or expenses under Chapter VI-A (like Section 80C, 80CCC, 80CCD, 80D, 80DD, 80DDB, 80E, Section 80EE, Section 80EEA, 80EEB, 80G, Section 80GG, 80GGA, 80GGC, 80IA, 80-IAB, 80-IAC, 80-IB, 80-IBA, etc. Section 80C deductions include commonly used investments mediums like contributions provident fund contributions, life insurance premium, ELSS, NPS, PPF, school tuition fee for children, etc.)
- Leave travel allowance (LTA) available to salaried employees, twice in a block of four years.
- House rent allowance (HRA).
- Interest on housing loan.
- Children education allowance.
- Deduction of Rs 15,000 allowed from family pension under Clause (iia) of Section 57.
- Deduction for professional tax.
Rebate under Section 87A is available under new tax regime
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While those opting for the new tax regime have to forgo several tax exemptions, they are offered the deduction under Section 87A. You can claim a maximum rebate of up to Rs 2,500 under Section 87A. The applicability of Section 87A means someone earning an income of Rs 5 lakhs will have to pay no income tax. Here is how:
Total income: Rs 5 lakhs
Income tax liability
Up to Rs 2.50 lakhs: Nil
From Rs 2.50 lakhs to Rs 5 lakhs: 5% = Rs 12,500
Deduction offered under Section 87A: Rs 12,500
Total tax liability: Nil
However, this benefit is available only to resident Indians and not NRIs.
New tax regime is optional
Note that the new tax regime is optional and an individual taxpayer has the freedom to continue paying his income tax based on the old tax regime (about which we would talk in the subsequent parts of this article), if he so wishes. FY 2020-21 was the first time when individual taxpayers got to choose between the old tax regime and the new tax regime while filing their income tax returns.
Sticking with new tax regime is not mandatory even if you switched to it once
One can opt for switching to the new tax regime on a year-to-year basis.
No different treatment to senior citizens, super senior citizens under new tax regime
Tax slabs under the new tax regime are based only keeping in view an individual’s income and not their age. So even if you are over 60 years of age and earn over Rs 15 lakhs as your income, you will have to pay 30% income tax. The same remains true if you are over 80 years of age and fall under the category of super senior citizen. You will pay the same rate of tax as someone in the age of 20 or 30 years.
The same logic applies in case of basic exemption limit – an income of Rs 2.50 lakhs remains the basic exemption limit for those opting for new tax regime, irrespective of their age.
Old income tax slab
The old tax regime, which continues to exist parallel with the new tax regime, offers only 4 slabs under which an individual’s income is taxed. Unlike the new tax regime, the old tax regime enables the taxpayer to enjoy deductions and exemptions on their tax liability under various sections of the income tax law.
Old income tax slabs for individual aged below 60 years and HUF
| Income | Old tax regime slab rate |
| Up to Rs 2.50 lakhs | Nil |
| From Rs 2.50 lakhs to Rs 5 lakhs | 5% |
| From Rs 5 lakhs to Rs 7.50 lakhs | 20% |
| From Rs 7.5 lakhs to Rs 10 lakhs | 20% |
| From Rs 10 lakhs to Rs 12.50 lakhs | 30% |
| From Rs 12.50 lakhs to Rs 15 lakhs | 30% |
| Above Rs 15 lakhs | 30% |
Old income tax slabs for individual aged between 60-80 years
| Income | Old tax regime slab rate |
| Up to Rs 3 lakhs | Nil |
| From Rs 3 lakhs to Rs 5 lakhs | 5% |
| From Rs 5 lakhs to Rs 10 lakhs | 20% |
| Over Rs 10 lakhs | 30% |
Old income tax slabs for individual aged over 80 years
| Income | Old tax regime slab rate |
| Up to Rs 5 lakhs | Nil |
| From Rs 5 lakhs to Rs 10 lakhs | 20% |
| Above Rs 10 lakhs | 30% |
New tax regime vs old tax regime
| Income | Old tax regime | New tax regime | ||
| Age up to 60 years | Age 60-80 years | Age over 80 years | All age groups | |
| Up to Rs 2.50 lakhs | Nil | Nil | Nil | Nil |
| From Rs 2.50 lakhs to Rs 3 lakhs | 5% | Nil | Nil | 5% |
| From Rs 3 lakhs to Rs 5 lakhs | 5% | 5% | Nil | 5% |
| From Rs 5 lakhs to Rs 7.50 lakhs | 20% | 20% | 20% | 10% |
| From Rs 7.50 lakhs to Rs 10 lakhs | 20% | 20% | 20% | 15% |
| From Rs 10 lakhs to Rs 12.50 lakhs | 30% | 30% | 30% | 20% |
| From Rs Rs 12.50 lakhs to Rs 15 lakhs | 30% | 30% | 30% | 25% |
| Above Rs 15 lakhs | 30% | 30% | 30% | 30% |
There is no one-size-fits-all rule when it comes to switching between old and new income tax regime, even though one might seem better than the other at the first look. A taxpayer has to examine his individual case to arrive at a decision. If you are someone who has invested in several tax-saving options like life insurance policies, medical insurance, PPF, home loan, education loan, etc., and HRA and LTA are a part of your salary, it makes sense to stick with the old tax slab.
Those who are not comfortable investing their money in these instruments and have an annual income of up to Rs 15 lakhs, can opt for the new tax regime, because of the lower rates.
This can be understood by examples.
Old vs new tax regime? Which one is better
Example 1
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Kunal Munshi has an annual income of Rs 15 lakhs and he is claiming the deductions offered under various sections of the income tax law, Section 80C, Section 24, etc.
| Old tax regime | New tax regime | |
| Annual income | Rs 15 lakhs | Rs 15 lakhs |
| Standard deduction | Rs 50,000 | – |
| Deduction under Section 80C | Rs 1.50 lakhs (for home loan principal payment, contribution towards PPF and life insurance policy) | – |
| Deduction under Section 24 | Rs 2 lakhs (against home loan interest payment) | – |
| Total taxable income | Rs 11 lakhs | Rs 15 lakhs |
| Tax slab | Old rate | New rate | Tax in Rs as per old rate | Tax in Rs as per new rate |
| Up to Rs 2.50 lakhs | 0% | 0% | Nil | Nil |
| From Rs 2.50 lakhs to Rs 5 lakhs | 5% | 5% | Rs 12,500 | Rs 12,500 |
| From Rs 5 lakhs to Rs 7.50 lakhs | 20% | 10% | Rs 50,000 | Rs 25,000 |
| From Rs 7.50 lakhs to Rs 10 lakhs | 20% | 15% | Rs 50,000 | Rs 37,500 |
| From Rs 10 lakhs to Rs 12.50 lakhs | 30% | 20% | Rs 30,000 | Rs 50,000 |
| From Rs 12.50 lakhs to Rs 15 lakhs | 30% | 25% | Nil | Rs 62,500 |
| Total taxable income | Rs 1,52,500 | Rs 1,87,500 |
For Kunal, sticking with the old regime works better.
Example 2
Vimal Kumar earns Rs 8 lakhs as his annual income and pays Rs 50,000 towards life insurance policy premium and Rs 1 lakhs towards PPF.
| Old tax regime | New tax regime | |
| Annual income | Rs 8 lakhs | Rs 8 lakhs |
| Standard deduction | Rs 50,000 | – |
| Total taxable income | Rs 7.50 lakhs | Rs 8 lakhs |
Total tax liability
| Tax slab | Old rate | New rate | Tax in Rs as per old rate | Tax in Rs as per new rate |
| Up to Rs 2.50 lakhs | 0% | 0% | Nil | Nil |
| From Rs 2.50 lakhs to Rs 5 lakhs | 5% | 5% | Rs 12,500 | Rs 12,500 |
| From Rs 5 lakhs to Rs 7.50 lakhs | 20% | 10% | Rs 50,000 | Rs 25,000 |
| From Rs 7.50 lakhs to Rs 10 lakhs | 20% | 15% | — | Rs 7,500 |
| Total tax liability | Rs 72,500 | Rs 45,000 |
In this case, switching to the new tax rate regime works out better for the taxpayer.
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Income tax latest updates
Budget 2022: No change in income tax slab
The Budget 2022 left the real estate sector highly disappointed in general and the home buyers in particular, who were hoping for various measures that would support the second-biggest employment-generating sector in India.
Apart from a brief mention of the PMAY programme, the nearly one-and-a-half-hour long Budget Speech on finance minister Nirmala Sitharaman made no reference to real estate, considered critical for an overall recovery after the coronavirus-induced economic paralysis.
While no new sops have been announced for the industry, no tweaks have been made in income tax slabs either in the Budget 2022, a widely expected move by analysts in their pre-Budget wish list. Home buyers, however, were expecting that the basic exemption limit will be increased to Rs 3 lakh from the current Rs 2.50 lakh.
Income tax slab: Rates for FY 20-21
Under new tax regime
| Income slab | Tax rate |
| 0 to rS 2.50 lakh | None |
| Rs 2.50 lakh to Rs 3 lakh
Rs 2.50 lakh to Rs 5 lakh* |
5% (rebate under 87A is applied) |
| Rs 5 lakh to Rs 7.5 lakh | 10% |
| Rs 7.5 lakh to Rs 10 lakh | 15% |
| Rs 10 lakh to Rs 12.5 lakh | 20% |
| Rs 12.5 lakh to Rs 15 lakh | 25% |
| More than Rs 15 lakh | 30% |
*For senior citizens
Income tax slab rates for FY 2019-20
For individual (less than 60 years) and HUFs
| Income slab | Income tax rate |
| Up to Rs 2.50 lakh | None |
| Rs 2.50 to Rs 5 lakh | 5% |
| Rs 5 lakh to Rs 10 lakh | 20% |
| Above Rs 10 lakh | 30% |
Income tax slab rates for FY 2018-19
For individual (less than 60 years) and HUFs
| Income slab | Income tax rate |
| Up to Rs 2.50 lakh | None |
| Rs 2.50 to Rs 5 lakh | 5% |
| Rs 5 lakh to Rs 10 lakh | 20% |
| Above Rs 10 lakh | 30% |
Income tax slab rates for FY 2017-18
For individual (less than 60 years) and HUFs
| Income slab | Income tax rate |
| Up to Rs 2.50 lakh | None |
| Rs 2.50 to Rs 5 lakh | 5% |
| Rs 5 lakh to Rs 10 lakh | 20% |
| Above Rs 10 lakh | 30% |
FAQs
How much income is tax free in India?
For individuals, income of up to Rs 2.5 lakhs is tax-free, if they are below the age of 60. In case of people aged between 60 and 80, income of up to Rs 3 lakhs is tax-free. For individuals aged over 80 years, income of up to Rs 5 lakhs is tax-free.
What period in a year is taken into account to calculate income tax in India?
In India, income tax is levied on the annual income of a person. To impose this tax, a financial year is taken into account. A financial year in India starts on April 1 in one calendar year and ends on March 31 in the next calendar year.
Is it a must to opt for new tax regime to file income tax returns for AY 2021–22?
No, the new tax regime is optional. One may choose to opt for it or stick with the old tax regime.
What is the due date for filing income tax returns for individual taxpayers?
The due date for filing income tax returns for individual taxpayers is July 31 of the assessment year.
How does age impact income tax liability?
Under income tax laws in India, there are three age-based tax slabs. 1. For people aged below 60 2. For people between 60 and 80 years of age, known as senior citizens 3. For people above 80 years of age, known as super senior citizens Note that tax slab for partnership firms and LLPs, companies, local authorities and co-operative societies are different, too.
How many types of individual taxpayers are there?
Under Indian income tax laws, individual taxpayers are put into the following three categories based on their age: Individuals (aged less than of 60 years), including residents and non-residents Resident senior citizens (60-80 years of age) Resident super senior citizens (aged over 80 years)
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