According to the Indian Income Tax Act, taxes are levied on all citizens, HUFs, partnership businesses, LLPs, and corporate bodies. Individuals are taxed according to the slab structure if their income exceeds the minimum threshold level. Let’s look at the Indian tax slabs 2021 analysis as per the Income Tax Act.

Let’s go through the basics first:

What is Income Tax?

Income tax is a sort of tax imposed by governments on revenue made by enterprises and persons within their jurisdiction. Citizens are required by law to submit an annual income tax return in order to establish their tax obligations.

Governments rely on income taxes to generate money. It is used to pay for government commitments, support public services, and give necessary commodities to residents.

What is an Income Tax Slab?

Individual taxpayers in India pay income tax based on a slab structure. A slab structure means that various tax rates are set for various income groups. It indicates that the tax rates continue to rise as the taxpayer’s earnings rise. This sort of taxation allows the government to have fair and equitable tax schemes. These tax slabs in India are subject to change with each budget. These slab amounts differ for various types of taxpayers. There are three different categories of individual taxpayers in India, namely:

  • Individual Residents (<60 years of age)
  • Senior Residents (60-80 years of age)
  • Super Senior Residents (>80 years of age)

New Optional Tax Regime

This optional new regime provides the taxpayers with the choice of either:

  • To pay tax at reduced rates under the New Tax system in exchange for foregoing certain allowed deductions and exemptions allowed under income tax, or
  • To keep paying taxes at the current tax levels. By remaining in the previous regime and paying income tax at the present higher level, the assessee can obtain exemption and deductions.

Please keep in mind that the tax levels in the revised tax system are equal for all groups of individual taxpayers, namely HUF and individuals up until the age of 60 years, senior citizens over the age of 60 years up to the age of 80 years, as well as super senior folks over the age of 80 years. As a result, there will be no enhanced baseline exemption limit incentive accessible to senior or super elderly individuals under the New Tax framework.

Income Tax Slab in India for Financial Year 2020-21 and Assessment Year 2021-22 (New Tax Regime)

Tax Slab

Tax Slab Rate for Financial Year 2020-21

<2,50,000 INR

0% of the Income Amount

2,50,000 – 3,00,000 INR

5% of the Income Amount

3,00,000 – 5,00,000 INR

5% of the Income Amount

5,00,000 – 7,50,000 INR

10% of the Income Amount

7,50,000 – 10,00,000 INR

15% of the Income Amount

10,00,000 – 12,50,000 INR

20% of the Income Amount

12,50,000 – 15,00,000 INR

25% of the Income Amount

>15,00,000 INR

30% of the Income Amount

Individuals having a net taxable earning of just under or equal to 5,00,000 INR would be entitled to a tax refund under Section 87A, which means that their tax burden will be zero under both the new and existing tax slabs in India. The basic exemption ceiling for NRIs is 2,50,000 INR, regardless of age.

In all situations, an extra 4% Education and Health cess will be charged to the income tax obligation. (up from 3% in the Fiscal year 2018-19)

In all of the above-mentioned groups, there will be a surcharge based on the tax levels shown below:

  • If your overall income exceeds 50,000 INR, you would be subject to a surcharge amount of 10% income tax.
  • If your entire income exceeds 1,00,000 INR, you would be charged a surcharge at a rate of 15%.
  • If your entire income exceeds 2,00,000 INR, you would be subject to a surcharge amount of 25% income tax.
  • If your entire income exceeds 5,00,000 INR, you would be charged a surcharge at a rate of 37%.

Indian Income Tax Slab Rate for Financial Year 2020-21 and Assessment Year 2021-22 (Old Tax Regime) – Individual Residents (<60 years of age)

Tax Slab

Tax Slab Rate for Financial Year 2020-21

<2,50,000 INR

0% of the Income Amount

2,50,000 – 3,00,000 INR

5% of the Income Amount

3,00,000 – 5,00,000 INR

5% of the Income Amount

5,00,000 – 7,50,000 INR

20% of the Income Amount

7,50,000 – 10,00,000 INR

20% of the Income Amount

>10,00,000 INR

30% of the Income Amount

For the fiscal year 2018-19, the income tax exemption ceiling is 2,50,000 INR for individuals, HUFs under 60 years of age, and NRIs. An extra 4% Education and Health cess will be levied on the tax sum.

There will be a surcharge based on the tax levels shown below:

  • If your overall income is between 50,000 INR and 1,00,000 INR, you would be subject to a surcharge amount of 10% income tax.
  • If your entire income exceeds 1,00,000 INR, you would be charged a surcharge at a rate of 15%.

Indian Income Tax Slab Rate for Financial Year 2020-21 and Assessment Year 2021-22 (Old Tax Regime) – Senior Residents (60-80 years of age)

Tax Slab

Tax Slab Rate for Financial Year 2020-21

<3,00,000 INR

0% of the Income Amount

3,00,000 – 5,00,000 INR

5% of the Income Amount

5,00,000 – 7,50,000 INR

20% of the Income Amount

7,50,000 – 10,00,000 INR

20% of the Income Amount

>10,00,000 INR

30% of the Income Amount

For the fiscal year 2018-19, the income tax exemption threshold for elderly citizens over the age of 60 but under the age of 80 is Rs. 3,00,000. An extra 4% Education and Health cess will be levied on the tax sum.

There will be a surcharge based on the tax levels shown below:

  • If your overall income is between 50,000 INR and 1,00,000 INR, you would be subject to a surcharge amount of 10% income tax.
  • If your entire income exceeds 1,00,000 INR, you would be charged a surcharge at a rate of 15%.

Indian Income Tax Slab Rate for Financial Year 2020-21 and Assessment Year 2021-22 (Old Tax Regime) – Super Senior Residents (>80 years of age)

Tax Slab

Tax Slab Rate for Financial Year 2020-21

<5,00,000 INR

0% of the Income Amount

5,00,000 – 7,50,000 INR

20% of the Income Amount

7,50,000 – 10,00,000 INR

20% of the Income Amount

>10,00,000 INR

30% of the Income Amount

For the fiscal year 2018-19, the super senior citizen income tax exemption ceiling is Rs. 5,00,000 for those over the age of 80. An extra 4% Education and Health cess will be levied on the tax sum.

There will be a surcharge based on the tax levels shown below:

  • If your overall income is between 50,000 INR and 1,00,000 INR, you would be subject to a surcharge amount of 10% income tax.
  • If your entire income exceeds 1,00,000 INR, you would be charged a surcharge at a rate of 15%.

New Tax Regime Conditions

If a taxpayer chooses tax concessions rates under the New Tax framework, he or she must forego certain deductions and exemptions available under the current tax scheme. There are a total of 70 prohibited exemptions and deductions, the most widely utilized of which are mentioned below:

  1. LTA or Leave Travel Allowance.
  2. HRA or House Rent Allowance.
  3. Conveyance allowance.
  4. Relocation allowance.
  5. Children’s education allowance.
  6. Helper allowance.
  7. Special Allowances under Section 10(14) of the Income Tax Act.
  8. The cost incurred on a daily basis under employment.
  9. Salary Standard Deduction.
  10. Housing Loan Interest under Section 24 of the Income Tax Act.
  11. Professional Tax.
  12. Chapter VI-A Deduction except Section 80CCD(2) of the Income Tax Act.

Here are the approved deductions under the new Income Tax Regime:

  1. Allowance for transportation for persons with special needs.
  2. Conveyance allowance for expenses incurred when traveling to and from employment.
  3. Notified Pension Scheme Investment under Section 80CCD(2) of the Income Tax Act.
  4. Deduction for fresh staff employment under Section 80JJAA of the Income Tax Act.
  5. Depreciation under section 32 of the Indian Income-tax Act.
  6. Any travel expenses incurred as a result of employment or even a transfer.

Old Income Tax Regime vs. New Income Tax Regime:

Tax Slabs in India Current Tax Slab Amounts for Financial Year 2020-21 New Tax Slab Amounts for Financial Year 2020-21
Individual Resident Taxpayers
(<60 years)
Senior Resident Taxpayers (60-80 years) Super Senior Resident Taxpayers
(>80 years)
HUF and Individual Taxpayers
<2,50,000 INR 0% of the overall income 0% of the overall income 0% of the overall income 0% of the overall income
2,50,000 – 3,00,000 INR 5% of the overall income* 0% of the overall income 0% of the overall income 5% of the overall income*
3,00,000 – 5,00,000 INR 5% of the overall income* 5% of the overall income* 0% of the overall income 5% of the overall income*
5,00,000 – 7,50,000 INR 20% of the overall income 20% of the overall income 20% of the overall income 10% of the overall income
7,50,000 – 10,00,000 INR 20% of the overall income 20% of the overall income 20% of the overall income 15% of the overall income
10,00,000 – 12,50,000 INR 30% of the overall income 30% of the overall income 30% of the overall income 20% of the overall income
10,00,000 – 12,50,000 INR 30% of the overall income 30% of the overall income 30% of the overall income 20% of the overall income
12,50,000 – 15,00,000 INR 30% of the overall income 30% of the overall income 30% of the overall income 25% of the overall income
>15,00,000 INR 30% of the overall income 30% of the overall income 30% of the overall income 30% of the overall income

*87A tax rebate is applicable in this Income Tax Slab. Section 87A provides that if a resident individual’s overall taxable income is less than or equal to 3,50,000 INR, he/she shall receive a tax benefit of 2,500 INR or the income tax sum, whichever is less.

Old Income Tax Regime vs. New Income Tax Regime: Which is better? 

The new tax structure would mostly help middle-class taxpayers with taxable income of up to 15,00,000. For high-earning taxpayers, the old tax regime is a preferable alternative.

Individuals who make small investments will benefit from the new income tax scheme. Because the new system provides seven cheaper income tax brackets, anyone paying income tax without seeking tax deductions can gain from needing to pay reduced tax rates under the new income tax regime. As a result, if you want to spend less on tax-saving initiatives, opt for the new tax system.

However, if you possess a financial strategy in place for creating wealth, such as investing in tax-saving methods, purchasing life insurance and mediclaim, paying children’s tuition costs, paying EMIs on education loans, purchasing a new home with an affordable home loan, etc, the old regime benefits you with increased tax deductions and reduced tax expenditure.

In consideration of the foregoing and knowledge of the revised income tax system, taxpayers may compare both regimes when they wish to take advantage of the lower tax levels. As a result, it is best to do an overall comparative analysis and evaluation under both systems before deciding on the most advantageous one, which may differ from one taxpayer to another.

Old Income Tax Regime vs. New Income Tax Regime: Time of Selection

  • Salary or any other source of income subject to TDS

    A worker can pick the new tax system and notify their organization at the start of the fiscal year 2020-21. Annually, employees have the choice of changing their tax regime.

  • Nevertheless, if the new income tax slab system is chosen at the start of a year, it is not subject to be altered for TDS purposes at any point throughout that particular year; but even so, the choice can be modified at the point of submitting their income tax return.

  • Earnings from Business and Profession

    In the event of company or professional revenue, the option to select between income tax systems is only accessible once for a certain enterprise.

Income Tax Slab in India for Financial Year 2020-21 and Assessment Year 2021-22 (New Tax Regime) – Domestic Organizations

Organizations

Tax Slab Amount

Organization electing for Section 115BAB of the Income Tax Act (not covered by Sections 115BA & 115BAA), licensed on or after 1st October 2019, and manufacture beginning before or on 31st March 2023.

15% of the overall income

Organization electing for Section 115BAA, which requires that a firm’s overall income be determined without taking into account specific exclusions, exemptions, incentives, and extra depreciation.

22% of the overall income

Organization electing for Section 115BA and enrolled on or after 1st March 2016, involved in the manufacturing of any item or property, and does not seek the exemption indicated in the section.

25% of the overall income

Firm whose revenue or total receipt is less than 400,00,00,000 in the Previous Year 2018-19

25% of the overall income

Any other domestic corporation

30% of the overall income

Income Tax Slab in India for Financial Year 2020-21 and Assessment Year 2021-22 (Old Tax Regime) – Domestic Organizations

Organizations

Tax Slab Amount

Organization electing for Section 115BAB of the Income Tax Act (not covered by Sections 115BA & 115BAA), licensed on or after 1st October 2019, and manufacture beginning before or on 31st March 2023.

0% of the overall income

Organization electing for Section 115 BAA, which requires that a firm’s overall income be determined without taking into account specific exclusions, exemptions, incentives, and extra depreciation.

0% of the overall income

Organization electing for Section 115BA and enrolled on or after 1st March 2016, involved in the manufacturing of any item or property, and does not seek the exemption indicated in the section.

0% of the overall income

Firm whose revenue or total receipt is less than 400,00,00,000 in the Previous Year 2018-19

25% of the overall income

Any other domestic corporation

30% of the overall income

In all situations, an extra 4% Education and Health cess will be charged to the tax obligation.

The following surcharges apply to businesses:

  • When overall income exceeds 1,00,00,000 INR, a surcharge on income tax is levied at a rate of 7%.
  • When overall income exceeds 10,00,00,000 INR, a surcharge on income tax is levied at a rate of 12%.
  • When a domestic firm elects Sections 115BAA and 115BAB of the Income Tax Act, a surcharge on income tax is levied at a rate of 10%.

Income Tax Slab in India for Financial Year 2020-21 and Assessment Year 2021-22 – Partnership Organizations or Limited Liability Partnership

Organization

Tax Slab Amount as per Old Tax Slab

Tax Slab Amount as per New Tax Slab

Any Partnership Organizations or Limited Liability Partnership

30% of the overall income

30% of the overall income


FAQ’s

Under Section 234F of the Income Tax Act, the penalties of late filing of Income Tax Return for Assessment Year 2020-21 are as follows:

Date of E-Filing If your overall income is <5,00,000 INR If your overall income is >5,00,000 INR
December 31, 2021 Nil Nil
December 31, 202,1 to March 31, 2022 1,000 INR 5,000 INR

Any money earned by agriculture or related activities is not eligible for taxation. Nevertheless, it will be taken into account for computing the tax amount on any non-agricultural earnings you may earn.