December 1, 2020

What Do You Need To Know About Income Tax Slab

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Income tax slab is the different tax groups in which the taxpayers are categorized into. These are based on the taxable income earned by the taxpayers and the rate of income tax to be paid by these.  The tax slabs are revised in every budget. As per the budget announced in the current fiscal year, the income tax slabs are divided into six slabs along with one slab of tax exemption, as listed follows:

Income Tax rateIncome slab
0%Upto Rs 2.5 lakhs
5%From Rs 2.5 lakhs to up to  Rs 5 lakhs
10%From Rs 5 lakhs to up to Rs 7.5 lakhs
15%From Rs 7.5 lakhs to up to Rs 10 lakhs
20%From 10 lakhs to up to Rs 12.5 lakhs
25%From Rs 12.5 lakhs to Rs 15 lakhs 
30%From Rs 15 lakhs and above

As per the current tax regulations of the fiscal year 2020-2021, taxpayers who have a choice to opt for either the latest tax regime or the old tax regime. If a person opts for a new tax regime, he or she is required to give up on certain exemptions and deductions. These include conveyance, house rent allowance, professional tax, interest benefit on housing loan as per section 24 C, allowance for relocation, allowance for child’s education, various standard deductions, and special allowance as per section 10 of the Income-tax act. The option to choose between the old or the new and to give up expectations has to be selected prior to filling the ITR for the fiscal year 2021-2022. 

Further, the above tax slab is designed for people aged below sixty years of age. For seniors above the age of 60 and below and the age of 80, and for citizens above age 80, the tax slabs are different. These are listed in the following table:

Income slabIncome tax rate for people above 60 and less than 80 years of ageIncome tax rate for people above 80 years of age
Up to Rs 3 lakhs for people above 60 and less than 80, and up to Rs 2.5 lakhs for people above 80.No taxNo tax
From above up to Rs 5 lakhs5%No tax
From 5 lakhs up to Rs 7.5 lakhs10%10%
From 7.5 lakhs up to Rs 10 lakhs15%15%
From 10 lakhs to up to Rs 12.5 lakhs20%20%
From 12.5 lakhs to up to Rs 15 lakhs25%25%
From Rs 15 lakhs and above30%30%

Choosing between the old and the new tax regime has now become the talk of the town, after a provision to choose between the two has been given. Though many people have clear cut opinions on the same, there are some who are confused. However, to make a wise decision, it is important that you figure out both the pros and cons of the new tax regime. The new regime is ideally beneficial to people who hold lower investment portfolios. Further, since it allows people to give up on exemptions and allowance, the complex procedure of paying tax can be escaped from, as paying the tax is easy as per the new scheme. On the other hand, it holds a drawback for people who invested their funds in investments like PPF, or NPS in lieu of exemptions. Further, since the exemptions from the saving scheme can not be availed, the household savings are likely to suffer from the new tax regime. Thus based on these facts, a taxpayer should make a wise tax that best suits his finances.

Read more: Income Tax Slab Rates