In India, income tax is imposed on individual taxpayers on the basis of a slab system where various tax rates have been prescribed for various slabs and such tax rates keep increasing within the income slab. The Union Budget 2020 introduced a new income tax scheme with decreased tax rates for those ready to forego 70 tax-exemptions and deductions under it. This new tax system has been made optional and remains to co-exist with the old one that includes three tax rates and various tax exemptions and deductions accessible to a taxpayer. The new income tax slabs and rates have come into impact from April 1, 2020, for FY 2020-21.
Income tax rates and slabs under new tax scheme for FY 2020-21
| Total income (Rs) | Income tax slab rate |
| Upto 2.5 lakh | nil |
| From 2,50,001 to Rs 5,00,000 | 5 percent |
| From 5,00,001 to Rs 7,50,000 | 10 percent |
| From 7,50,001 to 10,00,000 | 15 percent |
| From 10,00,001 to Rs 12,50,000 | 20 percent |
| From 12,50,001 to 15,00,000 | 25 percent |
| Above 15,00,000 | 30 percent |
The TDS slab rate at income depends on the salary of a person and based on that it varies between 10% to 30%. People with a net taxable income of up to Rs 5 lakh in a financial year will be able to use a tax discount of Rs 12,500 under section 87A in both the existing/old and new tax schemes. Effectively, this suggests that taxpayers with a net chargeable income of up to Rs 5 lakh will still pay zero tax in both the tax schemes.
Under the current tax scheme, the basic tax exclusion limit for a person depends on their age and residential status. According to their age, resident taxpayers are classified into three categories:
1. Resident under the age of 60 years
2. Resident senior citizens over 60 years but under 80 years
3. Resident super senior citizens over the age of 80 years
Here is the latest income tax slabs for FY 2018-19, FY 2019-20, and FY 2020-21:
Income tax slabs for resident individuals under 60 years of age for FY 2019-20, 2020-21
| Taxable income slabs | Income tax rates and cess |
| Upto 2.5 lakh | nil |
| Rs 2,50,001 to Rs 5,00,000 | 4% cess + 5% of (Total income minus Rs 2,50,000) |
| Rs 5,00,001 to Rs 10,00,000 | Rs 12,500 + 4% cess + 20% of (Total income minus Rs 5,00,000) |
| Rs 10,00,001 and above | Rs 1,12,500 + 4% cess + 30% of (Total income minus Rs 10,00,000) |
Income tax slabs for a resident individual between 60 and 80 years of age (Senior Citizen Tax Slab) for FY 2019-20, 2020-21
| Taxable income slabs | Income tax rates and cess |
| Upto 3 lakh | nil |
| Rs 3,00,001 to Rs 5,00,000 | 4% cess+ 5% of (Total income minus Rs 3,00,000) |
| Rs 5,00,001 to Rs 10,00,000 | Rs 10,000 +4% cess + 20% of (Total income minus Rs 5,00,000) |
| Rs 10,00,001 and above | Rs 1,10,000 + 4% cess + 30% of (Total income minus Rs 10,00,000) |
Income tax slabs for a resident individual over 80 years of age (Super Senior Citizen) FY 2019-20, 2020-21
| Taxable income slabs | Income tax rates and cess |
| Upto 5 lakh | nil |
| Rs 5,00,001 to Rs 10,00,000 | 4% cess + 20% of (Total income minus Rs 5,00,000) |
| Rs 10,00,001 and above | Rs 1,00,000 + 4% cess +30% of (Total income minus Rs 10,00,000) |
As per the Budget 2019 announcement, no alterations in the income tax slab rate have been made. A discount of Rs 12,500 will be available for all taxpayers with taxable income up to Rs 5 lakh. This discount will be available under Section 87A of the Income Tax Act from FY 2019-20 onwards. Also, the standard deduction for the financial year 2019-20 would be Rs 50,000.
As per the current income tax slab, imposition of tax on the income of resident people under 60 years is as follows: Income up to Rs 2.5 lakh is excluded from tax, 5 percent tax on income from Rs 250,001 to Rs 5 lakh; 20 percent tax on income between Rs 500,001 – Rs 10 lakh; and 30 percent tax on income over Rs 10 lakh.
For senior citizens (aged 60 years or over but under 80 years), income up to Rs 3 lakh is excluded from tax. Income from Rs 300,001 to Rs 5 lakh is taxed at 5 percent.
For super senior citizens, aged 80 years and over, income up to Rs 5 lakh are excluded from tax. Income from Rs 500,001 to Rs 10 lakh is taxed at 20 percent and over Rs 10 lakh is taxed at 30 percent.
In Budget 2018, cess on income tax has risen to 4 percent for FY 2018-19 onwards from 3 percent for FY 2017-18 across the board for taxpayers. Due to the rise in cess, the liabilities (assuming an income of Rs 15 lakh) for the highest slab have grown by Rs 2,625. In the middle-income tax slab, the tax deduction rises by Rs 1,125, and there is a simple incre