2019-06-22 14:32:04TaxesEnglishIncome tax is a direct tax that is charged based on income tax slabs. Here’s a detailed article on income tax rates for FY 18 - 19 and FY...https://quickbooks.intuit.com/in/resources/in_qrc/uploads/2019/06/Income-Tax-Slabs-e1561193901185.jpghttps://quickbooks.intuit.com/in/resources/taxes/income-tax-slabs-rates/Income Tax Slabs: Rates For Financial Years 2018 – 19 and 2019 – 20

Income Tax Slabs: Rates For Financial Years 2018 – 19 and 2019 – 20

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Income tax is a form of direct tax. It is levied by the government on your income, revenue or profit earned as a taxpayer in a particular financial year. But, this tax is paid in the assessment year. Furthermore, the provisions of the Income Tax are governed by the Income Tax Act, 1961.

But, there are certain basics you need to know before we jump to the income tax slabs, . This is in order to better understand the income tax slabs. So let’s get started.

Taxes in India – An Overview

There are two types of taxes that are collected by the government – Direct and Indirect Taxes.

A. Direct Tax:

This tax is Levied on your income, profit or revenue earned in a financial year. As the name suggests, these taxes are directly paid by you (as a taxpayer) to the Central government. In other words, there is no intermediary involved in the payment of direct tax. Thus, income tax is a type of direct tax which is collected by the Center.

B. Indirect Tax:

This tax is imposed on goods and services and not on your income, revenue or profit as a taxpayer. So, you would pass on or collect the tax from another taxpayer if you are liable to pay such a tax. That is why it is called an indirect tax. Goods and Services Tax (GST) is an indirect tax levied on the goods and services sold for domestic consumption. This is a tax collected by both Center and State governments.

The indirect tax structure included a host of Indirect Taxes prior to GST. These included taxes such as Excise Duty, Service Tax, VAT etc. This made the taxpayers pay multiple taxes and file multiple returns. Furthermore, they suffered from the issue of tax on tax. This made government implement GST in India. GST has brought about uniformity in tax rates and relieved taxpayers of multiple taxes. Hence, these and many other advantages of GST made it one of the biggest tax reforms of India.

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What is a Financial Year (FY)?

The year in which you earn income as a taxpayer is the Financial Year. It is the year immediately preceding the assessment year. Furthermore, the financial year is also called the previous year. Therefore, the FY begins on April 1st of the current year and ends on March 31st of next year according to the Income Tax Act 1961.

What is an Assessment Year (AY)?

It is the year, following the financial year in which your income as a taxpayer is assessed or evaluated. Then, income tax is paid on the income generated in the previous year following such assessment . AY begins on April 1st and ends on March 31st of the year after the FY according to the income tax act.

So income for FY 2018 – 2019 is assessed and liable for taxation in the AY 2019 – 2020.

Who is Liable to Pay Income Tax?

Individuals, generating income above the exemption limit, and companies earning revenue in a FY are liable to pay income tax.

Thus, Income Tax in India is imposed based on an income tax slab system. Income tax slabs are defined based on:

  • different categories of individual taxpayers,
  • companies and
  • the income earned by them in any financial year.

Furthermore, individual taxpayers are divided into following three categories for the purpose of defining the Income Tax Slabs:

  • Individuals and Hindu Undivided Family (HUF) below 60 years of age
  • Senior Citizens who are above 60 years, but below 80 years of age
  • Super senior citizens who are above 80 years of age

Thus, income tax rates and income slabs are decided based on these categories of individuals. These tax rates vary each year and are announced during the government budget of the year.

Thus, Income tax slabs for the FY 2019 – 2020 (AY 2020 – 2021) were announced during the budget 2019. The highlight of the budget was a complete tax rebate to individual taxpayers with a taxable income of upto Rs. 5,00,000.

So, let’s now have a look at the income tax slabs for different taxpayers given the above scenario.

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Income Tax Slabs for Taxpayers for Financial Year 2019 – 2020 (Assessment Year 2020 – 2021)

Income Tax Slabs For Individuals and Hindu Undivided Families (HUFs) Below 60 Years for Financial Year 2019 – 2020 (Assessment Year 2020 – 2021)

Income Tax Slabs Rates For Individuals and Hindu Undivided Families For Years 2019 - 20

Notes:

  • Surcharge @ 10% of income tax, in cases where the total income exceeds Rs.50 lakh up to Rs.1 crore.
  • Surcharge @ 15% of income tax, in cases where the total income exceeds Rs.1 crore.
  • The exemption limit of up to Rs. 2,50,000 in the Financial Year 2019 – 2020 is for individuals and HUFs below 60 years. This is different for senior and super senior citizens.
  • Also, individual taxpayers with an annual taxable income of upto Rs 5 Lakhs will now get full tax rebate under section 87A. This means, no income tax will have to be paid by individual falling in this income category. It is because the tax rebate was earlier Rs 2,500 in the budget for the year 2018 – 2019. It has now been raised to Rs 12,500 in 2019 – 2020. This makes the income tax NIL for taxpayers earning less than Rs 5,00,00 per annum. This rebate is available on the amount of income tax before Cess @ 4%

Let’s try to understand the income tax calculation and treatment of income tax rebate via examples.

But before that, there are some basic terms you should know. This is in order to understand the workings of income tax calculation.

Exemption

This is the income that is spared from tax. In other words, you are not required to pay any tax on the income that is categorized as exempted income. Take for instance individuals and HUFs under 60 years. These persons are required to pay no tax if they have an annual income of Rs. 2,50,000 . Exempted incomes are subtracted from your total annual income in order to calculate the income tax.

Deduction

After subtracting exempted income from your total annual income, what you’re left with is . You can now subtract deductions which are available under various sections of Income tax act. This is to further reduce your taxable income and consequently the income tax payable. These are the reductions from your annual taxable income. These reduce your annual taxable income and ultimately your income tax obligation. For example, if you are a salaried individual, you can now claim a standard deduction of Rs. 50,000.

 

Similarly, you can claim a deduction of up to Rs. 1,50,000 under section 80C. This is with regards to your investment in:

  • Equity Linked Saving Schemes,
  • Public Provident Fund (PPFs),
  • National Savings Certificates (NSC) and
  • a few other instruments.

Rebate

Exempted incomes and deductions are deducted from your taxable income. However, Rebate is an amount that is reduced from your income tax. After reducing exempted income and deductions, you get your net taxable income. Now, you apply the tax rate on this income to get your income tax payable. From this income tax payable, you deduct the amount of rebate available.

Example 1

Ryan is 25 years old and has an annual taxable income of Rs. 5,00,000. This is his income from:

  • salary,
  • house rent which he receives from his property and
  • capital gains after reducing deductions under section 80C from the same.

Now, Ryan is eligible for a tax rebate of Rs. 12,500 since he has a taxable income of Rs. 5,00,000.  Let’s see how will his income be taxed, based on the income tax slab system.

  • For the first Rs. 2,50,000 out of Rs. 5,00,000 there will be no tax. This is because this is exempted income.
  • For the remaining Rs. 2,50,000 (Rs 5,00,000 – Rs. 2,50,000), the tax rate applicable would be 5%.

Therefore, Income tax Payable = 2,50,000 x .05 = Rs. 12,500

The tax payable comes to Rs. 12,500. But, Ryan’s taxable income falls in the bracket of up to Rs. 5,00,000. Thus, he is eligible to get a tax rebate of Rs. 12,500. Therefore, this Rs. 12,500 will be reduced from the amount of income tax payable.

Income Tax Payable = Rs. 12,500
(-) Rebate = Rs. 12,500
Thus, Income Tax Payable = Rs.0

This is what Central Government announced in the interim budget 2019 – 2020. So all taxpayers with income upto Rs. 5,00,00 will effectively pay no tax.

Example 2

Juhi is 30 years old and has an annual taxable income of Rs. 12,00,000. This is her income from:

  • salary,
  • house rent which she receives from her property and
  • capital gains after reducing deductions under section 80C from the same.

Now, Juhi has an annual taxable income of more than Rs. 5,00,000. Hence, she is not eligible for a tax rebate of Rs. 12,500. So let’s see how will her income be taxed, based on the income tax slab system.

  • For the first Rs. 2,50,000 out of Rs. 12,00,000 there will be no tax. This is because it is exempted income
  • The next Rs. 2,50,000 from Rs. 9,50,000 (12,00,000 – 2,50,000) will invite a tax rate of 5%. Income Tax = 2,50,000 x .05 = Rs. 12,500 (I)
  • Going further, the next Rs. 5,00,000 from the remaining Rs. 7,00,000 (9,50,000 – 2,50,000) will be taxed @ 20%. Income Tax = 5,00,000 x .20 = Rs. 1,00,000 (II)
  • Lastly, the remaining Rs. 2,00,000 (7,00,000 – 5,00,000) will be taxed @ 30%. Income Tax = 2,00,000 x .30 = Rs. 60,000 (III)

Thus total income tax payable = I + II + III = 12,500 + 1,00,000 + 60,000 = Rs. 1,72,500

Further, Juhi’s taxable income does not fall in the bracket of up to Rs. 5,00,000. So, she is not eligible to get a tax rebate of Rs. 12,500. Therefore, this Rs. 12,500 will not be reduced from the amount of income tax payable.

Income Tax Slabs For Senior Citizens 60 Years and Above but Below 80 Years for Financial Year 2019 – 2020 (Assessment Year 2020 – 2021)

Income Tax Slabs Rates For Senior Citizens

Notes:

  • Surcharge @ 10% of income tax, in cases where the total income exceeds Rs.50 lakh up to Rs.1 crore.
  • Surcharge @ 15% of income tax, in cases where the total income exceeds Rs.1 crore.
  • This exemption limit of up to Rs. 3,00,000 in the FY 2019 – 2020 is for senior citizens. Senior citizens include persons above 60 years but below 80 years of age. This is different for individuals and HUFs and super senior citizens.
  • Also, senior citizens too, with an annual taxable income of upto Rs 5 Lakhs, will now get full tax rebate. This means, no income tax will have to be paid by individual falling in this income category. It is because the tax rebate was earlier Rs 2,500. It has now been raised to Rs 12,500 in 2019 – 2020 in the budget for the year 2018 – 2019. This makes the income tax NIL for taxpayers earning less than Rs 5,00,00 per annum. This rebate is available on the amount of income tax before cess @ 4%.

Income Tax Slabs For Super Senior Citizens 80 Years Old and Above for Financial Year 2019 – 2020 (Assessment Year 2020 – 2021)

Income Tax Slabs Rates For Senior Citizens

Notes:

  • Surcharge @ 10% of income tax, in cases where the total income exceeds Rs.50 lakh up to Rs.1 crore.
  • Surcharge @ 15% of income tax, in cases where the total income exceeds Rs.1 crore.
  • This exemption limit of up to Rs. 5,00,000 in the FY 2019 – 2020 is for super senior citizens. Super senior citizens include persons who are 80 years old and above. This is different for individuals and HUFs and senior citizens.

Income Tax Slabs For Domestic Companies for Financial Year 2019 – 2020 (Assessment Year 2020 – 2021)

Income Tax Slabs Rates For Domestic Companies

Notes:

  • Surcharge @ 10% of income tax, in cases where the total income exceeds Rs.50 lakh up to Rs.1 crore.
  • Surcharge @ 15% of income tax, in cases where the total income exceeds Rs.1 crore.
  • This exemption limit of up to Rs. 5,00,000 in the FY 2019 – 2020 is for super senior citizens. Super senior citizens include persons who are 80 years old and above. This is different for individuals and HUFs and senior citizens.

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Information may be abridged and therefore incomplete. This document/information does not constitute, and should not be considered a substitute for, legal or financial advice. Each financial situation is different, the advice provided is intended to be general. Please contact your financial or legal advisors for information specific to your situation.

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