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Income Tax Rates in India - An Introduction

  • Highlights

  • Tax slab rates are in line with age and net taxable income

  • Based on income, regular citizens pay 5%, 20% or 30% tax

  • Seniors and super-seniors enjoy relaxed tax slab rates

  • Home loan repayment aids in reducing net tax liability

Income tax is a form of direct tax collected by the Income Tax Department of India. As a taxpayer, you pay this charge as per the tax slab rate applicable to you. However, note that in India, taxes are not levied in a uniform manner. Instead, income tax rates differ as per the category you fall under and your net annual income, as determined by the Central Government. Knowing the rate of Income Tax in India and how to compute your post-deduction liability will help you start 2020 on a positive financial note.

Read on for a rundown on income tax slab rates and a look at the possible tax calculations.

What is the Income Tax Rate in India?

As mentioned, taxes in India are levied in accordance with a slab system. While an income tax rebate under Section 87A has been introduced, the slab rates themselves have not been altered since 2018.

These income tax slab rates are based on age- and income-specific criteria, and in order to understand the quantum of charge currently levied by the Government, consider the slab rates that apply to individuals below the age of 60 years.

Income Tax Slab for Financial Year 2020- 2021

Income Tax Slab Tax Slab Rate
Up to Rs.2.5 lakh Nil
Exceeding Rs.2.5 lakh and up to Rs.5 lakh 5%
Exceeding Rs.5 lakh and up to Rs.7.5 lakh 10%
Exceeding Rs.7.5 lakh and up to Rs.10 lakh 15%
Exceeding Rs.10 lakh and up to Rs.12.5 lakh 20%
Exceeding Rs.12.5 lakh and up to Rs.15 lakh 25%
Exceeding Rs.12.5 lakh and up to Rs.15 lakh 25%
Exceeding Rs.15 lakh 30%

Aspects that affect the Income Tax Slabs and Rates in India

As a taxpayer, it's important to know that for you, tax rates depend mainly on two parameters: age and income. This means that the amount of tax you pay each year changes as you age and is in accordance with your net annual income. The Income Tax rate in India also depends on the Government’s policies. However, once the slabs and rates are determined, from a personal point of view, all you need to do is look up the correct slab rate and then carry out income tax filing, making use of the provisions extended by the Government.

That being said, since the tax rates are subject to revision, time is another factor that affects the slab rates in India. This means that as you make your annual income tax payment, knowing the rates applicable for the particular Financial Year or Assessment Year become crucial. With this knowledge you’ll know just how much income tax refund you’re eligible for as well on filing Income Tax Returns.

Similarly, it’s good to note that income tax slab rates change with the nature of the taxpayer. While individuals and Hindu Undivided Families come under one bracket, domestic companies are taxed differently.

Categorisation of Income Tax Slabs and Rates in India

To help you understand how taxes are charged, below is a detailed breakdown of the income tax slabs in India for the Financial Year 2019-20.

  • For individuals below the age of 60 years

    Income Tax Slab

    Tax Slab Rate

    Up to Rs.2,50,000

    No charge

    Rs.2,50,001–Rs.5,00,000 

    5% on income in excess of Rs.2,50,000

    Rs.5,00,001–Rs.10,00,000

    Rs.12,500 + 20% on income in excess of Rs.5,00,000

    More than Rs.10,00,000

    Rs.1,12,500 + 30% on income in excess of Rs.10,00,000

  • For individuals aged over 60 years, but less than 80 years

    Income Tax Slab

    Tax Slab Rate

    Up to Rs.3,00,000

    No charge

    Rs.3,00,001–Rs.5,00,000 

    5% on income in excess of Rs.3,00,000

    Rs.5,00,001–Rs.10,00,000

    Rs.10,000 + 20% on income in excess of Rs.5,00,000

    More than Rs.10,00,000

    Rs.1,10,000 + 30% on income in excess of Rs.10,00,000

  • For individuals aged 80 years or more

    Income Tax Slab

    Tax Slab Rate

    Up to Rs.5,00,000

    No charge

    Rs.5,00,001–Rs.10,00,000 

    5% on income in excess of Rs.5,00,000

    More than Rs.10,00,000

    Rs.1,00,000 + 30% on income in excess of Rs.10,00,000

Apart from the tax rate, certain surcharges and cesses are also applicable as follows:

  • A 4% health and education cess is applicable on the income tax slabs for regular, senior and super-senior citizens, as described above.

  • For FY 2019-2020, a surcharge ranging from 10% to 37% is payable by taxpayers with incomes ranging from Rs.50 lakh to Rs.5+ crore.

Taxes are also synonymous with benefits and deductions:

  • Section 87A specifies for a rebate of up to Rs.12,500 for taxpayers with total incomes after deductions not exceeding Rs.5 lakh

  • Standard deduction for FY 19-20 is Rs.50,000 and you can claim other deductions under various sections of the Income Tax Act.

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Examples of Income Tax Calculation

Particulars (in Rs.)

Person 1

Person 2

Person 3

Annual salary

5,00,000

8,00,000

12,00,000

Interest earnings

75,000

1,00,000

1,25,000

Home loan interest

50,000

1,00,000

1,00,000

Section 80C deductions

1,50,000

1,50,000

1,50,000

Gross Taxable Income (GTI)

3,75,000

6,50,000

10,75,000

Tax slab rate

5%

20%

30%

Tax on GTI (A)

6,250

42,500

1,35,000

Section 87A rebate

6,250

nil

nil

4% cess on (A)

nil

1,700

5,400

Total tax

nil

44,200

1,40,400

Utilize income tax calculator to calculate what your income tax payment will be, first compute your gross taxable income by factoring in your salary and interest earnings and subtracting from it deductions and amounts spent towards home loan repayment. Then, note the income tax rate applicable to your gross taxable income. Finally, apply the slab rates, consider the Section 87A rebate, if any, and add 4% cess to the total. These calculations will help you plan your taxes, which you can file via the e-filing portal. You can also check your income tax refund status through the same website.

Remember that the taxes you pay hinge on the slab rate applicable to you, as well as deductions you can claim, such as the one available through home loan repayment. Additionally, keep in mind that taking loans such as the Bajaj Finserv Home Loan can help you bring down your outgo even more as you can claim tax deductions on both the principal and interest repayment. Moreover, you can enjoy cost-effective interest rates, PMAY subsidies of up to Rs.2.67 lakh and nil charges on part-prepayments when you choose this loan.

Going forward, take note of the income tax rates in India while planning your taxes and check your pre-approved offer to gain instant access to a home loan financing of up to Rs.3.5 crore, on customised terms. This will help you lower your tax liability while adding an asset to your portfolio.

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