Last Updated on May 25, 2022 by Neera Bhardwaj
Many entities, including individuals, HUFs, corporates, and so on, pay income tax. In India, this tax is a major source of Government revenue.
In the case of individuals, different income levels have different income tax slabs. These different slabs have been explained in detail down below.
Table of Contents
What are income tax slabs?
Income tax is imposed on individuals using a slab system where different income levels are charged with different levels of taxation.
Since India follows a progressive taxation system (in the case of income tax), the level of tax payable increases proportionately with an increase in income. The lowest earners are taxed the least in this system, while the highest earners are taxed the most. Income tax slabs are announced through the yearly Budget presented by the Finance minister.
Individual taxpayers are divided into three categories:
1. Individuals (aged less than 60 yrs) including residents and non-residents
2. Resident Senior citizens (60 to 80 yrs of age)
3. Resident Super senior citizens (aged more than 80 yrs)
Income tax slabs for AY 2021-22: Old and new regimes
The Government has introduced a new tax regime and has given the option to taxpayers to choose from the old regime and new regime. The tax rates for different categories of individuals are as follows:
For individuals aged less than 60 yrs and for HUF (Hindu Undivided Family)
| Taxable income | Rates under old regime | Rates under new regime |
Up to Rs. 2,50,000 | Nil | Nil |
Rs. 2,50,001 to Rs. 5,00,000 | 5% | 5% (tax rebate available) |
Rs. 5,00,001 to Rs. 7,50,000 | 20% | 10% |
Rs. 7,50,001 to Rs. 10,00,000 | 20% | 15% |
Rs. 10,00,001 to Rs. 12,50,000 | 30% | 20% |
Rs. 12,50,001 to Rs. 15,00,000 | 30% | 25% |
Above Rs. 15,00,000 | 30% | 30% |
For individuals aged 60 to 80 yrs
| Taxable income | Rates under old regime | Rates under new regime |
Up to Rs. 2,50,000 | Nil | Nil |
Rs. 2,50,001 to Rs. 3,00,000 | Nil | 5% (tax rebate available) |
Rs. 3,00,001 to Rs. 5,00,000 | 5% | 5% (tax rebate available) |
Rs. 5,00,001 to Rs. 7,50,000 | 20% | 10% |
Rs. 7,50,001 to Rs. 10,00,000 | 20% | 15% |
Rs. 10,00,001 to Rs. 12,50,000 | 30% | 20% |
Rs. 12,50,001 to Rs. 15,00,000 | 30% | 25% |
Above Rs. 15,00,000 | 30% | 30% |
For individuals aged above 80 yrs
| Taxable Income | Rates under Old Regime | Rates under New Regime |
| Up to Rs. 2,50,000 | Nil | Nil |
| Rs. 2,50,001 to Rs. 5,00,000 | Nil | 5% (tax rebate available) |
| Rs. 5,00,001 to Rs. 7,50,000 | 20% | 10% |
| Rs. 7,50,001 to Rs. 10,00,000 | 20% | 15% |
| Rs. 10,00,001 to Rs. 12,50,000 | 30% | 20% |
| Rs. 12,50,001 to Rs. 15,00,000 | 30% | 25% |
| Above Rs. 15,00,000 | 30% | 30% |
Note: Under the new regime, surcharges of 10%, 15%, 25%, 37% are applied on income when individual income exceeds Rs. 50 lakh, Rs. 1 cr., Rs. 2 cr., and Rs. 5 cr. respectively. However, there are exceptions to this like in the case of specified incomes like short-term and long-term capital gains.
Under the old regime, a 10% surcharge applied for incomes between Rs. 50 lakh and Rs. 1 cr.; and 15% for incomes exceeding Rs. 1 cr.
A tax rebate can be availed for incomes between Rs. 2.5 lakh and Rs. 5 lakh under u/s 87A in both old and new schemes.
A 4% education and health cess will be added to the total income tax liability in both old and new schemes.
Conditions for selecting the new regime
The taxpayer must select the desired regime before they file for income tax returns through Form 10IE or by informing their employer. Once selected, the choice of the regime cannot be changed for the rest of the financial year.
Individuals can opt for the new tax regime which has lower income tax rates. However, the lower rates are accompanied by fewer deductions and exemptions. Taxpayers choosing the new regime must forego the following deductions and exemptions:
1. Standard deduction of Rs. 50,000 under Section 80TTA/80TTB (for salaried individuals)
2. Leave travel allowance
3. House rent allowance
4. Minor child income allowance
5. Conveyance allowance
6. Helper allowance
7. Children’s education allowance
8. Deduction from family pension income
9. Interest on housing loan of self-occupied property or vacant property
10. Other special allowances
11. Professional tax
12. Relocation allowance
13. Daily expenses in the course of employment
14. Chapter VI-A deduction (Section 80C, 80D, 80E, and so on, except Section 80CCD (2) and Section 80JJAA)
Which regime is better?
There is no blanket answer for this question. Different taxpayers benefit from different regimes based on their income.
The old regime may suit taxpayers with incomes greater than Rs. 15 lakh. It is also better for those who have invested heavily in tax-saving instruments and have responsibilities like children’s education, insurance policies, home loans, and so on, as they can avail certain exemptions which are not available in the new tax regime.
On the contrary, the new tax regime may be more suitable for those with incomes lower than Rs. 15 lakh and low investments.
Conclusion
Perform a comparative analysis on your total tax liability under both regimes on an annual basis and then choose the most suited regime. Do note that each regime has its own conditions, deductions, and allowances. Consult your CA/tax advisor before filing returns.
