Income Tax Slab For F.Y 2020-21

What is the Income Tax Slab?

In India, where individuals earn an income within a diverse range, levying a tax on all individuals at a specific rate would not be a fair policy. The Act, therefore, segregates income ranges and levies tax at different rates as per the segregation. These groups are thus known as tax slabs.

The slabs also vary based on age if the taxpayer is an individual and as per the classification of entities. Income tax slabs are amended and revised each year during the Central Government’s Budget Session. These amendments and revisions once proposed are approved by the Parliament and implemented as law.

Income Tax Slabs for Resident Individuals

An individual resident’s basic exemption limit is decided based on his/her income. There are three categories of individual taxpayers that are categorized as:

  • Individuals within the age of 60 years which includes residents as well as non-residents.
  • Resident senior citizens with age above 60 years but below 80 years.
  • Resident Super senior citizens with age above 80 years.

Income Tax Slabs for Individuals below 60 years of age in FY 2020-21 (AY 2021-22)

Income Tax SlabTax Applicable as per New Regime
Rs.0 – Rs.2,50,000Nil
Rs.2,50,001 – Rs. 5,00,0005.00%
Rs.5,00,001 – Rs. 7,50,000Rs.12500 + 10% of total income exceeding Rs.5,00,000
Rs.7,50,001 – Rs. 10,00,000Rs.37500 + 15% of total income exceeding Rs.7,50,000
Rs.10,00,001 – Rs.12,50,000Rs.75000 + 20% of total income exceeding Rs.10,00,000
Rs.12,50,001 – Rs.15,00,000Rs.125000 + 25% of total income exceeding Rs.12,50,000
Above Rs. 15,00,000Rs.187500 + 30% of total income exceeding Rs.15,00,000
  1. The tax calculated on the basis of mentioned rates will be subject to health and education cess of 4%
  2.  Any individual who wishes to go by the new slab rates FY 2020-21 onwards will not be able to avail of certain exemptions and deductions/ tax benefits.
  3.  List of exemptions and deductions that won’t be available are:
  • Leave Travel Allowance (LTA)
  • House Rent Allowance
  • Conveyance
  • Daily expenses in the course of employment
  • Relocation allowance
  • Helper allowance
  • Children education allowance
  • Other special allowance [Section 10(14)]
  • Standard deduction
  • Professional tax
  • Housing loan interest (Section 24)
  • Deduction under Chapter VI-A (80C, 80D, 80E, and so on) (Except section 80CCD(2) – NPS contribution by the employer and 80JJA)

Important Things to Remember while Opting for the New Tax Regime

The options to be exercised on or before for every previous year where the individual or the HUF has no business income.

In case a taxpayer having a business income, an option once exercised cannot be taken back. Further, in case the taxpayer withdraws the option, it will be an irreversible option as he/she won’t be able to opt-in for the option again.

Income Tax Amendments in FY 2019-20

In the budget speech of Financial Year (FY) 2019-20, the Finance Minister announced certain revisions to the income tax rate structure. The income tax slab will thus be in force for the Assessment Year (AY) 2020-21.

Here are a few highlights of the changes announced in the Budget Session 2019-20.

  • An annual income of up to Rs. 5 lakh for resident individuals exempted from tax.
  • For individuals with annual income between Rs. 2 Crore to Rs. 5 Crore, the surcharge had been increased to 25%. The surcharge had also been increased to 37% for individuals with an annual income above Rs. 5 Crore.
  • Annual turnover of up to Rs. 400 Crore brought under corporate income tax slab of 25%.
  • TDS at the rate of 2% chargeable for cash withdrawals above Rs. 1 Crore in a year.

Income Tax Slabs for Individuals within 60 years of Age (FY – 2019-2020)

Slabs for Taxable IncomeApplicable Tax Rates & Cess
Within Rs. 2.5 LakhNil
From Rs. 2.5 Lakh to 5 lakh

Taxable income’s 5%

plus 4% cess on tax

From Rs. 5 Lakh to 10 Lakh

5% for taxable income between Rs. 2.5 Lakh and 5 Lakh

+ 20% on taxable income between Rs. 5 Lakh and 10 Lakh

plus 4% cess on tax

Above Rs. 10 Lakh

5% for taxable income between Rs. 2.5 Lakh and 5 Lakh

+ 20% on taxable income between Rs. 5 Lakh and 10 Lakh

+30% on taxable income above Rs. 10 Lakh

plus 4% cess on tax

Understand this taxation structure with the help of this example. Mr. X, aged 40 years, has an annual income of Rs. 7 Lakh. The tax calculation for him will thus be as follows.

Income tax on Rs. 2.5 Lakh @ Nil = Rs. 0

Income tax on Rs. 2.5 Lakh (Rs. 5 Lakh – Rs. 2.5 Lakh) @ 5% = Rs. 12,500

Income tax on Rs. 2 Lakh (Rs. 7 Lakh – Rs. 5 Lakh) @ 20% = Rs. 40,000

Total Income tax = Rs. 0 + Rs. 12,500 + Rs. 40,000 = Rs. 52,500

Plus cess @ 4% on Rs. 52,500 = Rs. 2,100

Total income Tax payable = Rs. 52,500 + Rs. 2,100 = Rs. 54,600

The Income Tax Act, 1961 also allows for deductions under sections 80(C) and 80(U) as applicable. In such cases, tax is calculated after taking into account such deductions, and cess added to arrive at the total tax payable.