Income Tax Slabs in India : Finance Minister Nirmala Sitaran is going to present the Union Budget 2022-23 on Tuesday. Taxpayers are expecting many gifts from him. Last year i.e. in the Union Budget 2021-22, the government did not make any changes in the tax slabs. That is why, there are still two options of income tax slab applicable in the previous budget i.e. General Budget 2020-21.
There are two options for taxpayers
In the Budget 2020-21, the Finance Ministry had given two options for income tax for the salary class. These options are still in effect. Taxpayers can choose either of these two options while filing their income tax return. Out of these two options, one option is the old/existing tax slab and the other option is the new tax slab, which was introduced in Budget 2020.
Many tax exemptions ended in the new option
Apart from the rates, the major difference in the new option is that various exemptions i.e. deductions have been done away with, whereas in the old / existing tax slab, you are getting the benefit of different types of tax deductions. Also 4% health and education cess is levied along with tax liability in all cases. Let us know in detail about these two tax slabs.
New tax slab introduced in budget 2020-21
The rates are lower in the tax slabs introduced in the Union Budget 2020-21, but other tax deductions under section 80C have been abolished. There is no tax on income up to Rs 2.5 lakh in the tax slab introduced in Budget 2020-21. Income from Rs 2.5 lakh to Rs 3 lakh is taxed at the rate of 5 per cent. Also, tax exemption of Rs 12,500 is available under u/s 87A.
Income between Rs 3 lakh to Rs 5 lakh is taxed at the same rate of 5 per cent as in the previous slab and is eligible for tax exemption of Rs 12,500 under u/s 87A. Thus, in this tax slab, no tax liability will be created by getting tax exemption under 87A up to income up to Rs 5 lakh.
Income between Rs 5 to 7.5 lakh is taxed at the rate of 10 per cent. Income of Rs 7.5 to 10 lakh is taxed at the rate of 15 per cent. Income between Rs 10 to 12.50 lakh is taxed at the rate of 20 per cent. Income between Rs 12.5 lakh and Rs 15 lakh is taxed at the rate of 25 per cent. After this, income above Rs 15 lakh is taxed at the rate of 30 percent.
What are the other tax options
The income tax rates in the tax slabs introduced in the Budget 2020-21 are the same for taxpayers up to the age of 60 years, senior citizens between 60 years and 80 years of age and super senior citizens above 80 years of age.
Tax rates as per old/new tax slab (below 60 years of age)
Here also no tax is payable on income of Rs 2.5 lakh. Income from 2.5 lakh to 5 lakh is taxed at the rate of 5 per cent. Income from Rs 5 lakh to Rs 10 lakh is taxed at the rate of 20 per cent. Income above Rs 10 lakh is taxed at the rate of 30 per cent. There is also tax exemption under 87A on income of Rs 2.5 to 5 lakh in the tax slab of this age group.
Rates as per old/new slab (for 60 to 80 years age group)
No tax is payable here on income up to 3 lakhs. Income of Rs 3 to 5 lakh is taxed at the rate of 5 per cent. Income of Rs 5 to 10 lakh is taxed at the rate of 20 per cent. Income above Rs 10 lakh is taxed at the rate of 30 per cent. Income up to Rs 3 to 5 lakh in this age group is also eligible for tax exemption under 87A.
Rates as per old/new tax slab (for age group above 80 years)
There is no tax on income up to 5 lakhs. There is a 20 percent tax on income between 5 to 10 lakhs. Income above Rs 10 lakh is taxed at 30 per cent.
No tax on income up to Rs 5 lakh
Tax deductions up to a maximum of Rs 1.5 lakh can be availed by investing in instruments specified under section 80C in the old/existing income tax slab. With this tax exemption, there will be no tax liability on income up to five lakhs in the old / existing income tax slab.
Conditions related to the choice of new tax slab
Taxpayers opting for concessional rates in the new tax regime will have to forego certain deductions and deductions available in the existing/old tax regime. There are 70 deductions including HRA, LTA, transfer allowance, education, interest on home loan, professional tax, which are not allowed in the new tax slab.
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