Income Tax Slabs 2021 – 2022

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income-tax

The government decides income tax slab rates under the Income Tax Act, 1961.

 

While partnership firms, corporates, and trusts are being taxed at a fixed rate, individuals and HUFs are taxed at different slab rates.

 

The slab rates change from time to time, considering different income levels and the basic standard of living of an average Indian through Union Budget. 

 

However, you may find it difficult to understand how to calculate taxes based on different slab rates given.

 

This blog will discuss how to calculate tax on your income using these slab rates and most importantly, what slab rates will apply to you for the assessment year 2021-22 relating to the financial year 2020-21.  

Understanding Tax Slab Rates

 

Slab rates under the Income Tax Act, 1961 refer to tax rates applicable to individuals and HUFs for different income ranges. The slab rates are divided into four categories: 

 

  • Individuals aged below 60 years of age;
  • Individuals more than 60 years of age but below 80 years;
  • Individuals above 80 years of age;
  • Hindu Undivided Families including AOP, BOI, and Artificial Juridical Person (non-human legal entity).

 

Under the Income Tax Act, 1961, the individuals and HUFs are provided with a basic exemption limit for income below where no tax is levied.  

Slab Rates as per New Tax Regime vs. Old Tax Regime

 

Budget 2020 provided an option to select either new slab rates or the old slab rates with certain conditions.

 

While there is no concrete evidence of whether new tax rates are beneficial or senior rates, it mainly depends on which income bracket your income falls. Before we discuss which is better, let’s understand are the rates as per new and old tax regimes. 

Slab Rates as per New Tax Regime

Individuals and HUFs of all age

Net Income Range AY 2021-22 
Up to INR 2,50,000 Nil
INR 2,50,001 to INR 5,00,000 5%
INR 5,00,001 to INR 7,50,000 10%
INR 7,50,001 to INR 10,00,000 15%
INR 10,00,001 to INR 12,50,000 20%
INR 12,50,001 to INR 15,00,000 25%
Above INR 15,00,001  30%

Important Notes

 

  • NRIs are given a basic exemption limit of INR 2,50,000 regardless of age;
  • The rebate under section 87A is available under the new tax scheme as well, which allows NIL tax liability to taxpayers if their income is less than or equal to INR 5,00,000;
  • Deductions under section 80C are not allowed under the new tax regime. Apart from that, many other allowances such as professional tax, standard deduction from salary, relocation allowance, etc., are not allowed. 

 

Add

Surcharge

Range of Income AY 2021-22 
INR 50 Lakhs to INR 1 Crore 10%
INR 1 Crore to INR 2 Crores 15%
INR 2 Crores to INR 5 Crores 25%
Exceeding INR 5 Crore 37%

 

Add

Health and Education Cess

It is levied at 4% on the amount of Tax plus Surcharge.

Slab Rates as per Old Tax Regime

Individual’s Slab Rates

Net Income Range AY 2021-22 
Up to INR 2,50,000
INR 2,50,001 to INR 5,00,000 5%
INR 5,00,001 to INR 10,00,000 20%
Above INR 10,00,001 30%

Senior Citizen’s Slab Rates (Above 60 years but below 80 years)

Net Income Range AY 2021-22 
Up to INR 3,00,000
INR 3,00,001 to INR 5,00,000 5%
INR 5,00,001 to INR 10,00,000 20%
Above INR 10,00,001 30%

Super Senior Citizen’s Slab Rates (Above 80 years)

Net Income Range AY 2021-22 
Up to INR 5,00,000
INR 5,00,001 to INR 10,00,000 20%
Above INR 10,00,001 30%

Hindu Undivided Family Slab Rates (Including AOP, BOI, and Artificial Juridical Person)*

Net Income Range AY 2021-22 
Up to INR 2,50,000
INR 2,50,001 to INR 5,00,000 5%
INR 5,00,001 to INR 10,00,000 20%
Above INR 10,00,001 30%

 

*AOP, BOI: Association of Persons (AOP), and Body of Individuals (BOI) refer to a group of individuals or company or firm to perform an economic activity to generate revenue without forming a company or a partnership firm.

 

Add

Surcharge

Range of Income AY 2021-22 
INR 50 Lakhs to INR 1 Crore 10%
INR 1 Crore to INR 2 Crores 15%
INR 2 Crores to INR 5 Crores 25%
INR 5 Crores to INR 10 Crores 37%
Exceeding INR 10 Crore 37%

Add

Health and Education Cess

It is levied at 4% on the amount of Tax plus Surcharge.

 

Note: Rebate under section 87A of 100 percent of income-tax or Rs. 12,500, whichever is less, is available to resident individuals whose net income is less than INR 5,00,000.

Which is Better? – Old vs. New Tax Rates 

 

Let us understand the comparison with the help of an example. Suppose your total income for the Assessment Year 2021-22 is INR 9,80,000. We will assess the tax liabilities under both regimes and understand which regime is more beneficial to you.

Particulars Old Regime (INR) New Regime (INR)
Total Income 9,80,000 9,80,000
Deductions: 

  • Section 80C
  • Section 80D
  • Standard Deduction for Salary
(1,50,000) (25,000)

(50,000)

Net Taxable Income 7,55,000 9,80,000
Tax Liability:

New Regime

Up to INR 2,50,000 (NIL)

INR 2,50,001 to INR 5,00,000 @ 5%

INR 5,00,001 to INR 7,50,000 @ 10%

INR 7,50,000 to INR 9,80,000 @ 15%

Old Regime

Up to INR 2,50,000 (NIL)

INR 2,50,001 to INR 5,00,000 @ 5%

INR 5,00,001 to INR 7,55,000 @ 20%

12,500

51,000

12,500

25,000

34,500

Total Tax Liability 63,500 72,000

 

As seen from the above example, if you have invested your money in the tax-savings instruments and have higher income slab rates, you will benefit under the old regime.

However, if you have not invested your money in tax-saving tools, you will benefit from the New Tax Regime as the new administration offers lower slab rates. 

Conclusion

It is not fair to suggest which tax regime is more suitable. You need to evaluate your savings, income, and allowable deductions under both tax regimes individually and then conclude which one will benefit you.

 

To get a perfect idea, we always recommend consulting your chartered accountant, who can perform an evaluation for you and suggest which slab will be better for you.

 

Happy Winting!

 

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