ITRLegal Advice

Change of Income Tax Rates in India for FY 2021-22 and 2022-23

The new budget of 2021 brought the new income tax rates. It has new exemptions and new rates. Let’s know about the income tax slabs and rates provided in the new financial year 2021-22.

Income tax is a type of direct tax that the government imposes on its citizens by taking various elements into consideration, such as age and income, to contribute to the revenue of the State. This revenue is later used to provide the required means for government services. You also have to pay income tax if you earn any assets or a non-transferable property in the form of capital gain tax and wealth tax.

Income Tax Slabs

According to their income and what tax they should pay, as per the taxation laws, the grouping of taxpayers is called the Income-tax slab. These income tax slabs help decide the income tax rates levied on a person and who is entitled to tax exemption. 

These exemptions are made by considering a person’s age and state of income. According to the slab, there are three kinds of people, i.e. residents and non-residents aged less than 60, senior citizens aged between 60 to 80, and super senior citizens aged more than 80.

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Income Tax Slab Rates for FY 2021-22 (AY 2022-23)


A person’s income in the financial year of 2021-2022 decides what tax he will pay to file income tax returns in the assessment year. The financial year and assessment year starts on 1 April and ends on 31 March.

Every earning individual needs to pay income tax as per the income tax slab rates. Paying taxes is not only limited to single individuals; every person involved in a Hindu Undivided Family, partnership firms, corporates, small businesses, and LLPs is entitled to pay tax. The income tax Act provides different tax rates for different categories or slabs supplied to the public every year. 

Use Vakilsearch`s Income tax calculator to decide your taxable profits and document your Individual Tax Return (ITR) with ease.

The current budget for 2022 brought no changes to the previous income tax bracket. This is the new Income Tax Slab Rate for FY 2021-2022.

 

Income tax slab  Income tax rate

 

Upto 2,50,000 Rs yearly

Exempted
2,50,000- 5,00,000 Rs  5% tax to be paid on income exceeding the maximum 
5,00,000 – 7,50,000 RS  10% tax to be paid on income exceeding the maximum + 12,500 

 

7,50,000 – 10,00,000

15% tax to be paid on income exceeding the maximum + 37,500
10,00,000 – 12,50,000  20% tax to be paid on income exceeding the maximum + 75,000 
12,50,000 – 15,00,000   25% tax to be paid on income exceeding the maximum 1,25,000    
  More than 15,00,000  30% tax to be paid on income exceeding the maximum 1,87,500
  • The new regime remains unchanged regarding the exception limit for all tax-paying citizens and binds everyone irrespective of age.
  • A person whose total annual income doesn’t exceed 5 lakhs can benefit from tax exemption. This exemption is described under section 87A of The income tax ACT. No money needs to be deposited for income under 5 lakhs annually. 
  • Whereas the tax exemption limit for NRIs is within 2.5 lakhs net annual income, irrespective of any age.
  • An additional health and education cess of 4% gets added to the income tax liability with the provided tax rate. Cess is the additional taxes that must be paid; it is the tax levied on another tax.
  • Also, an additional surcharge gets added as per the tax rate mentioned in the slabs.
  • If your total annual income doesn’t exceed more than 5 lakhs, you have to pay 5% of income tax.
  • If the annual income exceeds 5 lakhs and remains less than 7.5 lakhs, the total payable income tax will be 10%.
  • A 15% of income tax must be paid in the case where the total income exceeds 7.5 lakhs per annum and lies under 10 lakhs.
  • If the total annual income of a person remains between 10 lakhs and 12.5 lakhs, the payable income tax will be 20%.
  • If the total income of a person remains between 12.5 lakhs and 15 lakhs, the imposed income tax will be 25%.
  • In the case where the income of a person exceeds 15 lakhs, the imposed tax rate shall be 30%.
  • In order to explain the Surcharge levied on some income rates, other slabs are provided too. 
  • If the income range stays between 50 lakhs to 1 crore, a 10% surcharge shall be imposed.
  • If the range of income stays between 1 crore to 2 crores, a 15% surcharge shall be imposed.
  • If the income range stays between 2 crores to 5 crores, a 25% surcharge shall be imposed.
  • As proposed in Budget 2022, Surcharge on income under section 112 shall be a maximum of 15% on the transfer of any capital asset. Other long-term capital gains can arise graded Surcharge unto 37%.
  • An individual whose annual income does not exceed 5 lakhs can avail rebate under section 87A of the Income-tax Act. Before calculating the education cess, this rebate is deducted from it. The amount of rebate can be 100% of income tax or Rs. 12,500, whichever is less.
  • The cess and Surcharge remain variable according to the position of the taxpayer. HUF, domestic companies, partnerships, local authorities and foreign companies pay different cess and surcharge values in addition to the income tax levied upon them.

Income Tax Slab Rates for FY 2020-21

The income tax slab rates for 2021-22 are similar to the income tax slab rate for 2020-21 and apply equally to every individual, including senior citizens and super senior citizens.

How to Calculate Income Tax?

Before filing income tax returns, one needs to understand what slab he is in and what taxable income he does. Taxable income is an income that attracts income tax on it. If you are not under the no tax to be paid slab, you need to calculate what amount of tax you need to pay. A person’s income consists of a basic salary, transport allowance, special allowance, and house rent allowance.

  • The medical and telephone reimbursement gets exempted from income tax. If a person earns 6 lakhs rupees per annum as his basic salary, it becomes taxable. If the house rent allowance is 3 lakhs per annum, 1.8 lakhs will be exempted, and the taxable amount will be 1.2 lakhs.
  • If the transport allowance is 96,000 per annum, 19,200 will be deducted, and the payable amount will be 76,800.
  • There is no exemption on special allowance, so the same will remain; in this case, let’s take 60,000.
  • If the leave travel allowance is 20,000 per annum, 12,000 will be exempted to make it 8,000.
  • The total taxable income to be paid tax on will be 8,64,800 now.
  • More than 8 lakhs taxable income attracts a 20% income tax rate. So the final tax will be the exact 20% of the total taxable income.

New Regime Income Tax Slab Rates

In the new regime of income tax slab rates, many tax exemptions are not allowed, like house rent allowance, leave travel allowance, relocation allowance, daily expenses in the course of employment, special allowance, children’s education allowance, and interest on the house loan. The new income tax rates are equally imposed on everyone irrespective of their seniority. 

Conclusion 

To be a responsible citizen, a person must do his legal duty by filing an income tax return each year. Income taxes are levied on both personal wages and income generated by businesses. Non-payment of income taxes can put you in grave liabilities.

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