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The income tax slabs are applicable as per the net taxable income. Income tax is a tax levied on the net taxable income of a person. A person, here, includes an individual, Hindu Undivided Family (HUF), Association of person (AOP), Body of Individuals (BOI), a firm and a company.
Income tax in India is levied under the Income tax Act, 1961. Every year, the Finance Minister puts forth the Finance Bill in Parliament. The bill when passed by both the houses of the Parliament and along with the President’s assent results in the formation of the Income-tax act. The slabs and rates applicable for the current assessment year are specified in the first schedule of the Finance Act.
What is an income tax slab?
Income Tax in India is levied on the individual taxpayer on the basis of a slab system which is nothing more than a separate category according to the age of the taxpayer. The income tax rate in India under the existing regime is mentioned below:
- Resident Individuals below 60 years of age,
- Non Resident Individuals below the age of 60 years
- Resident senior citizens above 60 years of age but less than 80 years of age
- Resident super-senior citizens above 80 years of age
The income tax levied and paid by the individual would depend on the slab under which he/she is falling. We will be covering the income-tax rate for FY 2020-21 (the assessment year 2021-22)
Income tax slab AY 2021-22 for resident individuals
Budget 2020, provides an opportunity to choose between a new-tax regime or continue with the old-tax regime. The tax rate for FY 20-21 is different on the basis of the regime chosen by the individual. You can use Scripbox’s income tax calculator and estimate the tax liabilities under the old as well as new tax regime. Our income tax calculator is a simple and easy to use online tool.
Let us discuss the applicable slabs and rates in a detail.
Below are the Income Tax Rates for AY 21-22
Income tax slabs FY 2020-21 AY 2021-22 under the new income tax regime for all resident individuals
| Income Tax Slab | Tax Rate for Individual |
| Up to Rs. 2.5 lakh | Nil |
| Rs. 2.5 lakh to 5 lakh | 5% |
| Rs. 5 lakh to 7.5 lakh | 10% |
| Rs. 7.5 lakh to 10 lakh | 15% |
| Rs. 10 lakh to 12.5 lakh | 20% |
| Rs. 12.5 lakh to 15 lakh | 25% |
| Rs. 15 lakh & above | 30% |
Note: if the net annual income is under 5 lakh, rebate under section 87A is allowed and is limited to Rs. 12,500. This means that if the total tax liabilities is less than Rs.12,500, no tax is required to be paid.
The amount of tax payable by an individual as per the above slab rate will be increased by health and education cess on income tax of 4%
Furthermore, the above slab rate in India comes with a few restrictions. An individual has to let go of tax benefit or tax benefit and tax exemption to opt for the new tax regime. Like an individual taxpayer cannot claim deductions under section 80C, section 80D, section 80E etc
Below are the tax exemption & deductions which the taxpayer has to give up:
- House Rent Allowance (HRA)
- Leave Travel Allowance (LTA)
- Conveyance Allowance
- Helper Allowance
- Relocation Allowance
- Standard deduction
- Professional Tax
- Other Special Allowance
- Interest on housing loan allowed under section 24
- Deductions under Section 80C, Section 80D, 80E, etc. However deductions under Section 80CCD(2) can still be claimed.
The option to choose between the new and the old tax regime should be exercised before the due date of filing of income tax returns.
Income tax slabs AY 2021-22 FY 2020-21 under the old tax regime for all resident individuals
| Income Tax Slab for Individual | Tax rate for an individual below 60 years of age |
| Up to Rs. 2.5 lakh | Nil |
| Rs. 2,50,001 to Rs. 5,00,000 | 5% of the total income exceeding Rs. 5,00,000 |
| Rs. 5,00,001 to Rs. 10,00,000 | Rs. 12,500 + 20% of the total income exceeding Rs. 5,00,000 |
| Above 10,00,000 | Rs. 1,12,500 + 30% of the total income exceeding Rs. 10,00,000 |
The tax calculated as per the above income tax slab rates will be increased by a health and education cess on income tax of 4%. Furthermore, a tax rebate under section 87A is allowed to an individual taxpayer up to a maximum of Rs. 12,500 for individuals having net annual income of Rs. 5,00,000. The taxpayers can claim this tax rebate while filing income tax returns.
Senior Citizen Tax Slab for AY 21-22
Senior Citizen Tax Slab under the old tax regime for FY 2020-21 (AY 2021-22)
| Income Tax Slab | Senior Citizens (more than 60 years of age but less than 80 years of age) |
| Income up to Rs. 3,00,000 | Nil |
| Income from Rs. 3,00,000 – 5,00,0000 | 5% |
| Income from Rs. 5,00,000 – 10,00,000 | 20% |
| Above 10,00,000 | 30% |
The tax calculated as per the above slab rates will be increased by a health and education cess on income tax of 4%.
Super Senior Citizen Tax Slab FY 2020-21 AY 2021-22 under the old tax regime
| Income Tax Slab | Super Senior Citizens x(80 years of age and above) |
| Income up to Rs. 3,00,000 | Nil |
| Income from Rs. 3,00,000 – 5,00,0000 | 5% |
| Income from Rs. 5,00,000 – 10,00,000 | 20% |
| Above 10,00,000 | 30% |
The tax amount calculated as per the above income tax slab rates in India will be increased by a health and education cess of 4%.
In all the above cases, the amount of the income-tax calculated will be increased by a surcharge on income tax.
| Total Taxable Income | Surcharge Rate |
| Total income is greater than Rs, 50,00,000 but less than Rs. 1,00,00,000 | 10% |
| Total income is greater than Rs, 1,00,00,000 but less than Rs. 2,00,00,000 | 15% |
| Total income is greater than Rs, 2,00,00,000 but less than Rs. 5,00,00,000 | 25% |
| Total income is greater than Rs, 5,00,00,000 | 37% |
Hindu Undivided Family
“Hindu undivided family” has not been defined under the income tax act. As per the Hindu laws, HUF is a family that consists of all males lineally descended from a common ancestor and includes their wives and daughters.
HUF is treated as a separate person under the income-tax act. A HUF is taxed as per the below slab rate:
Income tax slabs under the old tax regime for Hindu Undivided Family for FY 2020-21 (AY 2021-22)
| Income Tax Slab | Tax Rate |
| Up to Rs. 2.5 lakh | Nil |
| Rs. 2,50,001 to Rs. 5,00,000 | 5% of the total income exceeding Rs. 5,00,000 |
| Rs. 5,00,001 to Rs. 10,00,000 | Rs. 12,500 + 20% of the total income exceeding Rs. 5,00,000 |
| Above 10,00,000 | Rs. 1,12,500 + 30% of the total income exceeding Rs. 10,00,000 |
Income tax slabs under the new income tax regime for Hindu undivided family for FY 2020-21 (AY 2021-22)
| Income Tax Slab | Tax Rate |
| Up to Rs. 2.5 lakh | Nil |
| Rs. 2.5 lakh to 5 lakh | 5% |
| Rs. 5 lakh to 7.5 lakh | 10% |
| Rs. 7.5 lakh to 10 lakh | 15% |
| Rs. 10 lakh to 12.5 lakh | 20% |
| Rs. 12.5 lakh to 15 lakh | 25% |
| Rs. 15 lakh & above | 30% |
The tax calculated in both the cases as per the above slab rates will be increased by a health and education cess of 4%.
In both the above cases, the amount of the income tax calculated will be increased by a surcharge as per the below table:
| Total Taxable Income | Surcharge Rate |
| Total income is greater than Rs, 50,00,000 but less than Rs. 1,00,00,000 | 10% |
| Total income is greater than Rs, 1,00,00,000 but less than Rs. 2,00,00,000 | 15% |
| Total income is greater than Rs, 2,00,00,000 but less than Rs. 5,00,00,000 | 25% |
| Total income is greater than Rs, 5,00,00,000 | 37% |
Associations of Persons, Bodies of Individuals and Other Artificial Judicial Persons
Before moving on to the taxation part, let us first understand what AOP, BOI and other Artificial Judicial persons are:
Association of person:
In general, whenever persons join together for a common purpose and action and their object is to produce income. This association will be considered as an association of person for the purpose of income tax in India. A person in AOP could be a company or an individual person. The term person could include any association, body of individuals, or company, irrespective of whether it is incorporated or not.
Body of Individuals:
The body of individuals denotes the status of persons like executors or trustees who merely receive the income jointly and who may be assessable in the same manner as the beneficiaries are assessed individually. Thus, in the case of BOI, only individuals can join with the intention of earning some income.
Artificial judicial person:
This would cover every artificial judicial person not covered elsewhere. For example, a deity would be assessed under the income tax act under an artificial judicial person.
Now that we know a bit of the above categories, let’s talk about their taxation.
Below are the applicable income tax rates to the above categories of persons:
| Share of profit of members is unknown | Share of profit of members is known |
| Tax will be levied at the maximum marginal rate. However, if any of the members of the AOP or BOI are taxed at a rate higher than the maximum marginal rate, then the AOP or BOI will be taxed at that higher rate. | A) The total income of any member (excluding the share from AOP/BOI)exceeds the minimum exemption limit: AOP/BOI’s will be taxed at the maximum marginal rate. B) No member has total income (excluding the share from AOP/BOI)exceeding the minimum exemption limit: AOP/BOI taxed at the rates applicable to an individual. |
In both the above cases, the amount of the income tax calculated will be increased by a surcharge as per the below table:
| Total Taxable Income | Surcharge Rate |
| Total income is greater than Rs, 50,00,000 but less than Rs. 1,00,00,000 | 10% |
| Total income is greater than Rs, 1,00,00,000 but less than Rs. 2,00,00,000 | 15% |
| Total income is greater than Rs, 2,00,00,000 but less than Rs. 5,00,00,000 | 25% |
| Total income is greater than Rs, 5,00,00,000 | 37% |
In the case of partnership firms and LLP, every firm is liable to pay tax @30% plus surcharge on income tax. This applicable surcharge is 12% if the net income is above Rs. 1 crore. along with a health and education cess of 4%.
Taxation of Companies:
A company, as per the income-tax act, can be divided amongst two categories, a domestic
Domestic Company:
A domestic company means an Indian company, which has been formed under the Companies Act 2013, or the erstwhile Companies Act 1956 and has its registered office in India.
Domestic companies can further be divided into two groups:
- Closely-held companies
- Widely-held companies
For both categories of companies, taxation will be based on the below criteria:
If the company opts to be taxed as per the old income tax regime:
| Total Income | Tax Rate |
| a) If the total turnover or gross receipts of the previous year 2018-19 does not exceed Rs. 400 croreb) In all other cases | 25% 30% |
| Certain manufacturing domestic companies opting to be taxed under section 115BA.Note: Conditions mentioned under 115BA(2) are to be satisfied, such as deductions and incentives are disallowed.a) The company has been registered and set-up on or after 01.03.2016.b) Company is engaged in the business of manufacturing of any article or thing.c) The total income shall be computed without considering the deductions u/s 10AA, 32AC, 32AD etc. | 25% |
Applicable Surcharge under old income tax regime:
| Total Income of the domestic company | Surcharge Rate |
| Total income is greater than Rs, 1,00,00,000 but less than Rs. 10,00,00,000 | 7% |
| Total income is greater than Rs, 10,00,00,000 | 12% |
Health and Education Cess on Income Tax:
Health and Education Cess to be levied @4% on income tax amount inclusive of surcharge.
If the company opts to be taxed as per the new regime as per section 115BBA
| Total Income | Tax Rate |
| a) If the total turnover or gross receipts of the previous year 2018-19 does not exceed Rs. 400 croreb) In all other cases Note: Conditions specified under section 115BAA are to be satisfied. No deductions and incentives are to be allowed | 22% |
The surcharge is applicable @10% irrespective of the fact whether the total net income is less than or more than 1 crore. This will be further increased by a Health & Education Cess of 4%.
If the company opts to be taxed as per the new regime as per section 115BAB
| Criteria | Tax Rate |
| Below are the conditions that need to be satisfied in order for the domestic company to opt for this section: a) The domestic company should be a manufacturing entity set up and registered on or after 01.10.2019b) The manufacturing business should be commenced on or before 31.03.2023c) The company should not be engaged in any business other than the business of manufacturing.d) The total income of the company has been computed without considering the deductions u/s 10AA, 32AD, 33AB, etc. | 25% |
The surcharge is applicable @10% irrespective of the fact whether the total net income is less than or more than 1 crore. This will be further increased by a Health & Education Cess of 4%.
Foreign Company:
For the purpose of the income-tax act, a foreign company means a company which is not a domestic company. A foreign company is taxed at a rate of 40% plus surcharge. Furthermore, a surcharge of 2% shall be levied if the total net income of the company exceeds Rs. 1 crore but less than Rs. 10 crores.
If the total net income exceeds Rs. 10 crores, a surcharge of 5% is levied on the total net income. This is further increased by a Health and Education Cess of 4%. This is levied on the income tax (inclusive of surcharge).
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