The Financial Minister introduced a new tax regime in Union Budget, 2020 wherein there may be an option for individuals and HUF (Hindu Undivided Family) that they have to pay taxes at the lower rates without claiming deductions under various sections. The following Income slab rates are notified in new tax regime vs the old tax regime:
Income Tax Rates and Slabs 2020-21
|Income Tax Slab||Tax Rates As Per New Regime||Tax Rates As Per Old Regime|
|0 – 25,0,000||NIL||NIL|
|2,50,001 – 5,00,000||5%||5%|
|5,00,001 – 7,50,000||12500 + 10% of total income exceeding 5,00,000||12500 + 20% of total income exceeding 5,00,000|
|7,50,001 – 10,00,000||37500 + 15% of total income exceeding 7,50,000||62500 + 20% of total income exceeding 7,50,000|
|10,00,001 – 12,50,000||75000 + 20% of total income exceeding 10,00,000||112500 + 30% of total income exceeding 10,00,000|
|12,50,001 – 15,00,000||125000 + 25% of total income exceeding 12,50,000||187500 + 30% of total income exceeding 12,50,000|
|Above 15,00,000||187500 + 30% of total income exceeding 15,00,000||262500 + 30% of total income exceeding 15,00,000|
New tax regime slab rates are not differentiate based on age group. However, under the old tax regime, the basic income threshold exempt from tax for senior citizens (aged 60 to 80 years) and super senior citizens (aged above 80 years) is 3 Lakh and 5 Lakh respectively.
Consider an example, a person aged 35 years has a total income of 11,00,000 and has made the investment under section 80C of 1,50,000 and under Section 80CCD of 50,000. He has claimed income tax deduction with medical and leave travel allowance of 50000 and HRA of 1,50,000.
The tax payable under the new and old tax regime is as follows:
|Particulars||New Regime||Old Regime|
|Gross Total Income||0||11,00,000|
|Less: Deductions under 80C||0||1,50,000|
|Less: Standard Deduction (Medical and Travel Allowance)||0||50,000|
|Less: Deductions under 80CCD||0||50,000|
|Less: HRA deduction as per section 10(13A)||0||1,50,000|
Income Tax Slabs and Rates for Financial Year 2019-20
|Income Tax Slab||Individuals Below The Age of 60 Years|
|Up to 2,50,000||Nil|
|2,50,001 to 5,00,000||5%|
|5,00,001 to 10,00,000||12,500 + 20% of total income exceeding 5,00,000|
|Above 10,00,000||1,12,500 + 30% of total income exceeding 10,00,000|
- The tax calculated on the basis of mentioned rates will be subject to a health and education cess of 4%.
- 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.
- The list of exemptions and deductions that won’t be available are:
- Leave Travel Allowance (LTA)
- House Rent Allowance
- 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 the case of 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 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 crores to Rs. 5 crores, the surcharged has been increased to 25%. The surcharge has also been increased to 37% for individuals with an annual income above Rs. 5 crores.
- Annual turnover of up to Rs. 400 crores 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.
Surcharges Applicable for Resident Individuals
For FY 2019-20, new surcharge rates have also been introduced on the income of the rich. Check the table below to know how it applies.
|Annual Income (Taxable)||Applicable Surcharges|
|Between Rs. 50 Lakh and Rs. 1 Crore||10%|
|From Rs. 1 Crore to 2 Crore||15%|
|From Rs. 2 Crore to 5 Crore||25%|
|Rs. 5 Crore and Above||37%|
Income Tax Slabs for other Entities
Now, take a look at the income tax slab applicable to other entities.
- Domestic Company
For a domestic company, tax applicability for a given FY depends on the gross annual turnover it earned in the previous year.
|Gross Turnover Limit (For Previous Year)||Income Tax Rate|
|Up to Rs. 2.5 Crore||25%|
|Above Rs. 2.5 Crore||30%|
As per the announcement in the latest budget session, the introduction of income tax slab 2019 takes the gross turnover limit of Rs. 400 crore for the purpose. Also, a surcharge at the rate of 7% is applicable if the income of a domestic company is between Rs. 1 crore and Rs. 10 Crore. For income above Rs. 10 Crore, a surcharge of 10% is applicable.
A health and education cess of 4% also levied on the tax calculated.
- Partnership firm /LLP
For partnership firms and LLPs, there are no variable income tax slabs as the total income is taxable at the rate of 30%. Surcharge levied on firms falls under two categories mentioned below.
- 7% of tax calculated if the total income is between Rs. 1 Crore and Rs. 10 Crore
- 12% of tax calculated for total income above Rs. 10 Crore
Additional, health and education cess at the rate of 4% is also levied on the total tax.
- Local Authority
Income earned by a local authority is also taxable. However, there are no slab divisions, and any income generated by a local authority is taxed at a flat rate of 30%.
Additional, health and education cess is also levied at the rate of 4% on the tax calculated. A surcharge of 12% is also levied if the local authorities annual income exceeds Rs. 1 Crore
Surcharges Applicable for Resident Individuals
|Income Limit||Surcharge Rate on Income Tax Amount|
|Net income more than Rs. 50 lakhs but doesn’t exceed Rs. 1 crore||10%|
|Net Income is more than Rs. 1 Crore||15%|
Income Tax Slabs For Domestic Companies
|Gross turnover up to 250 Cr. In the FY 2016-17||25%|
|Gross turnover exceeding 250 Cr. In the FY 2016-17||30%|
Income Tax return filing is mandatory if the income falls under taxable slabs. So, make sure to keep a check on the due dates and file your income tax returns to avoid penalties.