Skip Navigation
0 of 0 Displaying
 |   Displaying

No Results

    Income Tax Slabs and Rates in India for FY 2020-21

    Last Updated On 22-03-2021

    Income tax is a tax levied by the Government of India on the earnings of taxpayers. Depending on the amount of earnings in a year, the government charges a fixed percentage of tax on the gross income as per the prevailing income tax rates. This income can include salary from a full time, freelance, or part-time job, interest earned from shares or other investments, rent collected from a real estate asset, agricultural income, etc.

    However, to make things favourable for the common citizen, the government also offers certain tax benefits and deductions. For instance, to reduce tax liability, people can use their life insurance premiums for a tax deduction or show the expenses incurred on a physically challenged dependent. All of these and more are special provisions that come under the purview of the Income Tax Act of 1961. Let’s first understand this act.

    Have us call you!

    Provide us with your contact details.

    We use this information to find local advisors for your needs.

    OTP sent successfully

    Thank you for getting in touch with us. We will contact you shortly.

     
     
     

    Income Tax Act of 1961

    The Income Tax Act of 1961 was implemented in the country on April 1, 1962. This act primarily oversees the collection and administration of income tax by the government. There are a total of 23 chapters and 298 sections in the act. The government also uses unique income tax slabs and offers relevant tax benefits like exemptions and deductions to people from different professions and income groups under this act.

    The tax is collected each year either at source in the form of Tax Deducted at Source (TDS) or advance tax or paid at the time of filing an income tax return (ITR). The government uses these funds to carry out developmental activities, such as making roads, ensuring rural development, covering the salaries of government employees, etc.

    What are income tax slabs?

    As mentioned above, the Government of India uses income tax slabs for every taxpayer. These are decided as per the income group that they come under. The lower the income, the lower is the percentage of tax paid. As taxpayers move up the ladder with a higher income, the tax percentage levied on their earnings also increases. Income tax slabs also differ as per the category of taxpayers. These categories can be divided as:

    • Resident and non-resident individual taxpayers who are under the age of 60.
    • Resident senior citizens between the ages of 60 and 80.
    • Resident super senior citizens over the age of 80.

    What are income tax rates?

    The income tax rate refers to the percentage that is charged on the income of an individual. This rate is decided by the government and announced each year in the annual budget. In the budget of 2020, a new tax regime was announced. However, the older regime was not entirely removed.

    As per the new rules and regulations, people can choose between either of the two tax regimes. While the new regime offers lower income tax rates, it does not allow individuals to use the power of income tax deductions to lower their tax liability. However, if one continues using the older tax regime (higher of the two), they can use tax deductions while filing their tax return.

    What are the differences in income tax rates for each tax slab in the new and old regime?

    This table shows the difference in the old and new tax regime for each category of individuals:

    Income tax slabs

    The old tax regime for resident individuals and Hindu Undivided Families (HUFs), and non-resident Indians under the age of 60

    The old tax regime for resident individuals and HUFs between the ages of 60 and 80

    The old tax regime for resident individuals and HUFs over the age of 80

    The new tax regime for all categories

    Below Rs.2.5 lakhs No tax No tax No tax No tax
    From Rs.2.5 lakhs to Rs.3 lakhs 5% No tax No tax 5%
    From Rs.3 lakhs to Rs.5 lakhs 5% 5% No tax 5%
    From Rs.5 lakhs to Rs.7.5 lakhs 20% 20% 20% 10%
    From Rs.7.5 lakhs to Rs.10 lakhs 20% 20% 20% 15%
    From Rs.10 lakhs to Rs.12.5 lakhs 30% 30% 30% 20%
    From Rs.12.5 lakhs to Rs.15 lakhs 30% 30% 30% 25%
    Above Rs.15 lakhs 30% 30% 30% 30%

    Note: In additions to the above base tax rates, surcharge and Cess will be applicable. Please consult your tax consultants for more details.

    What are the inclusions in the new tax regime for FY 2020-21?

    Here’s a list of tax deductions and exemptions included in the new tax regime:

    • Specially-abled people are allowed a transport allowance as a deduction.
    • Taxpayers can include the Notified Pension Scheme as per Section 80CCD (2).
    • Conveyance allowance is allowed under the new regime for travelling to work and in the case of job transfers.
    • Daily allowance incurred on routine expenses due to an absence of duty from work are also included.

    What are the exclusions in the new tax regime for FY 2020-21?

    Here’s a list of tax deductions and exemptions not included in the new tax regime:

    • House rent allowance (HRA)
    • Leave travel allowance (LTA)
    • Children education allowance
    • Minor child income allowance
    • Professional tax
    • Entertainment allowance
    • Helper allowance
    • Other special allowances under Section10(14)
    • Deductions from family pension
    • Interest on housing loan on a self-occupied and vacant property
    • Deductions made under Chapter VI-A like Section 80C, Section 80D, Section 80E, etc., barring Section 80CCD (2) and Section 80JJAA.

    What are the rules for selecting the new tax regime?

    As stated above, the decision to choose between the old and new tax regime lies entirely on the taxpayers. Individual taxpayers can choose the new regime for one year and switch to the old one for the next year, as per their suitability. There is no restriction on the number of times they shift from one regime to another. However, they do need to inform their employer of their choice.

    On April 13, 2020, the Central Board of Direct Taxation (CBDT) had also issued a notice for employers to get a signed declaration from their employees on the tax regime they wish to follow for a given year.

    But the selection process differs for businesses. If a businessperson chooses to opt for the new tax regime and later switches to the old tax regime, they will not have the option to pick the new tax regime again. In such a case, they will have to stick to the old tax regime.

    Which of the two regimes is better?

    The decision can vary for each taxpayer. The gross income, category of taxpayers, number and value of tax deductions, etc. can play a crucial role here. Taxpayers need to assess the two options and select the one that results in a lower tax liability. This may seem like a lengthy and complicated process. However, it will help individuals to determine the suitable course of action.

    Chartered accountants and other financial experts can also help taxpayers calculate their tax dues as per both regimes. Moreover, to make things easy, the income tax e-filing website offers an online calculator that can help people determine their tax dues as per the two tax regimes. However, business persons must be careful to pick the an ideal option, as they do not have the liberty to switch again.

    To sum it up

    Budget 2020 has made many changes to the tax filing and computation method. However, it also brings forth a choice for taxpayers. People can now choose how their taxes are calculated and filed. This can be of great assistance in making the right decision.

    However, for people who do stick to the old income tax rates, it is essential to have adequate investments and savings, such as life insurance, unit-linked investment plans, etc. in order to claim tax benefits and deductions. PNB MetLife offers great insurance products for people of all age groups and needs. Not only do these help secure the future but also bring tax benefits for the present.

    You can browse the website to learn more about Term Insurance Plans and the various Term plans offered by PNB MetLife.

    The article is as per our understanding of the Income Tax Laws. Clients are advised to take consult your tax advisors before taking any final position.

     

    Disclaimer:

    The aforesaid article presents the view of an independent writer who is an expert on financial and insurance matters. PNB MetLife India Insurance Co. Ltd. doesn’t influence or support views of the writer of the article in any way. The article is informative in nature and PNB MetLife and/ or the writer of the article shall not be responsible for any direct/ indirect loss or liability or medical complications incurred by the reader for taking any decisions based on the contents and information given in article. Please consult your financial advisor/ insurance advisor/ health advisor before making any decision.

    PNB MetLife India Insurance Company Limited
    Registered office address: Unit No. 701, 702 & 703, 7th Floor, West Wing, Raheja Towers, 26/27 M G Road, Bangalore -560001, Karnataka
    IRDAI Registration number 117 | CIN U66010KA2001PLC028883
    For more details on risk factors, please read the sales brochure and the terms and conditions of the policy, carefully before concluding the sale.
    Goods and Services Tax (GST) shall be levied as per prevailing tax laws which are subject to change from time to time.
    The marks "PNB" and "MetLife" are registered trademarks of Punjab National Bank and Metropolitan Life Insurance Company, respectively. PNB MetLife India Insurance Company Limited is a licensed user of these marks.
    Call us Toll-free at 1-800-425-6969, Phone: 080-66006969, Website: www.pnbmetlife.com, Email: indiaservice@pnbmetlife.co.in or Write to us: 1st Floor, Techniplex -1, Techniplex Complex, Off Veer Savarkar Flyover, Goregaon (West), Mumbai – 400062, Maharashtra. Phone: +91-22-41790000, Fax: +91-22-41790203.

    AD-F/2020-21/702

    Beware of Spurious Phone Calls and Fictitious / Fraudulent Offers!
    IRDAI is not involved in activities like selling insurance policies, announcing bonus or investments of premium. Public receiving such phone calls are requested to lodge a police complaint.

    TAXATION

    Can I pay zero tax at an income level of Rs 9.5 lacs?

    If you’re a salaried employee and earning around Rs. 9.5 lacs per year, the burden of income tax could erode a huge portion of your earnings. Fortu...

    TAXATION

    Direct Tax and Indirect Tax: Key Differences

    In India, the taxes levied by the government are divided into direct and indirect taxes. The direct and indirect taxes in India are differentiated ...

    TAXATION

    Everything you need to know about India’s Income Tax structure

    In India, income tax is a direct tax levied by the Central government. The tax structure in India follows an equitable model wherein everybody is t...

    TAXATION

    Financial decisions you should not delay while getting Life Insurance

    What school doesn’t teach you is that your smartest financial decision will be to start planning early on. Without this knowledge, many fall prey t...

    TAXATION

    Financial Planning Guide by PNB MetLife for 2020

    In the policy the investment risk in the investment portfolio is borne by the policyholder...

    Want to know more about how you can protect your family?

    See all our articles

    Disclaimer

    Collapsed Expanded

    As your trusted life insurance partner, PNB MetLife is with you amidst the current COVID-19 outbreak. Our policies also cover COVID-19 Claims. In case of a Death Claim, kindly submit the signed Claim Intimation Letter mentioning the policy number, brief of the insured event and other claim documents on the email mentioned herewith. Please write-in to us at claimshelpdesk@pnbmetlife.com or indiaservice@pnbmetlife.co.in. You can also call us on 1800-425-6969 for death claims intimations and for any queries on Monday - Saturday between 10:00 am - 7:00 pm.

    PNB MetLife Insurance, amongst the trusted Life Insurance companies in India, aims to provide a wide range of Life Insurance products that suits the needs of an individual at every stage of his life. Life Insurance Plans range from Term Life Insurance PlansTerm PlanProtection PlansLong Term Savings Plans , Retirement Plans & Child Education Plan.

    Site best viewed in following browsers
    Chrome 70+ , IE 11+, Firefox 76+, Safari 11+