Every year after the presentation of Union Budget by the Finance Minister, everyone is interested to know about the income tax slab and tax rates for the forthcoming year so that one can calculate how much extra tax one has to pay or saved. The Union Budget announces the tax slab and tax rates ahead of the commencement of the next financial year. The Union Budget 2019 is presented on July 5, 2019. Various tax proposals were announced in the Budget 2019 and proposals are contained in the Finance (No. 2) Bill, 2019 to amend the Income Tax Act, 1961.
There are various tax rates provided in the income tax law which is based on the status of the taxpayer. The income tax slab and tax rates are defined for every 'person' under the Income Tax Act, 1961 (hereinafter referred to as "the Act"). The tax liability is calculated on the basis of the applicable tax rates for the relevant assessment year.
Under the income-tax law, tax rates are of two types-
(i) Tax rates on the basis of income-slab
(ii) A flat rate of tax on the income
Income tax slab basis - is progressive taxation and tax rates in this basis are defined for Individuals, HUF, Cooperative society, AoP, BoI, local authority, and AJP. In the income-slab basis, the tax rate increases as there is an increase in the level of income. Thus who earns more pays high tax as compared to those earning less. It gains importance due to the fact that in this case, a level of income is set on which no tax is charged which is called 'basic exemption limit'.
Flat rate of tax- is levied on the income irrespective of the level of income. Every income earner pays the tax at the same rate and no discrimination is done in any case. Companies and firms are taxed on a flat rate basis.
In common parlance, the rates of tax applicable to Individual assessees or taxpayers is called as 'Personal Income Tax' and the tax rate applicable to companies is called 'Corporate tax'.
The personal and corporate tax rates are contained in the Finance Acts and not in the Income Tax Act. Every year the Finance Minister along with the Union Budget presents the Finance Bill, which after the receipt of assent of the President of India, becomes a Finance Act.
A Finance Bill (or Act) contains two set of tax rates- one is for the current year in which the Budget is presented and the other one is for the forthcoming year. As we know, every year the Union Budget is presented in the month of February. This year is an exception when the Union Budget, 2019 is presented in July due to the general election.
Thus, if the Union Budget is presented in February 2018 then the Finance Bill, 2018 will contain the tax rates for FY 2017-18 (current year) as well as the tax rates for FY 2018-19 (forthcoming FY). In the next Budget in February 2019, the tax rates provided for forthcoming FY 2018-19 in the Finance Act, 2018 will become the tax rates for current FY 2018-19 and will also contain the tax rates for forthcoming FY 2019-20. This is how the tax rates are prescribed in the law.
Thus, on 1st February 2019 the Finance Bill, 2019 was presented along with the Interim Budget, 2019.
The Finance Bill, 2019 provided two sets of tax rates-
One for the current FY 2018-19 (February 2019 falls in the FY 2018-19), and
Another one is for the forthcoming FY 2019-20.
When the Union Budget 2019 is presented in July 2019 along with Finance (No. 2), Bill, 2019, it contained the tax rates to give effect to the financial proposals of the government. Since no changes in tax rates were announced in the Union Budget, 2019, except the following two changes, the tax rate as prescribed by the Finance Act, 2019 is continued in the Finance (No. 2) Bill, 2019.
Changes in tax rate announced in the Union Budget, 2019-
1. Reduced rate of income-tax for companies: The rate of income-tax for all domestic companies having a turnover or gross receipts up to Rs. 400 crore in FY 2017-18 is 25 percent as compared to 30 percent for other domestic companies.
2. Increase in Surcharge rate: New surcharge rates for AY 2020-21 are introduced for Individuals, HUF, AOP, BoI, and Artificial Judicial Person (AJP) which are as follows-
For Income range
|
Surcharge
|
Income above Rs. 2 crore but up to Rs. 5 crore
|
25%
|
Income above Rs. 5 crore
|
37%
|
Actually, the tax rates for the forthcoming financial year is prescribed for the purpose of computation of tax liability and payment of advance tax including TDS on Salary in the forthcoming financial year. The tax rates for FY 2019-20 prescribed in the Finance Act, 2019 is for the purpose of computation and payment of advance income tax for the income expected to be earned in the FY 2019-20 which in the next Budget, 2020 will become the tax rates for the Assessment Year 2020-21.
Income Tax Slab and Tax Rates for Assessment Year (AY) 2020-21 or Financial Year (FY) 2019-20 after the Union Budget 2019 and as per Finance (No. 2), Bill, 2019:
Applicable Income Tax Slab Rates for AY 2020-21 for Individuals/HUF/AoP/BoI/AJP:
Table-1
Category of Taxpayer
|
Individual/HUF/AoP/BoI/AJP
|
Residential Status
|
Resident and Non-Resident
|
Age of the Taxpayer
|
Under 60 years of age
|
Total Income
|
Income-Tax Rate
|
Up to Rs. 2,50,000
|
Nil
|
Rs. 2,50,001 to Rs. 5,00,000
|
5%
|
Rs. 5,00,001 to Rs. 10,00,000
|
20%
|
Above Rs. 10,00,000
|
30%
|
Table-2
Category of Taxpayer
|
Individual (Senior Citizen)
|
Residential Status
|
Resident
|
Age of the Taxpayer
|
Above 60 years of age
|
Total Income
|
Income-Tax Rate
|
Up to Rs. 3,00,000
|
Nil
|
Rs. 3,00,001 to Rs. 5,00,000
|
5%
|
Rs. 5,00,001 to Rs. 10,00,000
|
20%
|
Above Rs. 10,00,000
|
30%
|
Table-3
Category of Taxpayer
|
Individual (Super Senior Citizen)
|
Residential Status
|
Resident
|
Age of the Taxpayer
|
Above 80 years of age
|
Total Income
|
Income-Tax Rate
|
Up to Rs. 5,00,000
|
Nil
|
Rs. 5,00,001 to Rs. 10,00,000
|
20%
|
Above Rs. 10,00,000
|
30%
|
Remarks: A Non-Resident Senior Citizen or a Very Senior Citizen Individual is not entitled to additional relief on income-tax slab rates. Only a Resident Senior Citizen or a Very Senior Citizen Individual is entitled to additional relief on income-tax slab rates.
Important:
|
|
Surcharge on Income-tax for
Individuals:
|
In all cases covering Table-1/2/3
above
|
Where
Total Income is up to Rs. 50 Lakh
|
Nil
|
Where
Total Income exceeds Rs. 50 Lakh but does not exceed Rs. 1 crore
|
10%
|
Where
Total Income exceeds Rs. 1 crore but does not exceed Rs. 2 crore
|
15%
|
Where
Total Income exceeds Rs. 2 crore but does not exceed Rs. 5 crore
|
25%
|
Where
Total Income exceeds Rs. 5 crore
|
37%
|
Health & Education Cess on Income-tax and Surcharge for Individuals/ HUF/AoP/BoI/AJP:
|
In all cases covering Table-1/2/3 above
|
Health & Education Cess
|
4%
|
Note: Rebate u/s 87A is allowed on tax liability to a resident Individual if Total Income does not exceed Rs. 5,00,000. The maximum amount of rebate is Rs. 12,500. This rebate is not allowed to a non-resident and persons other than Individual.
|
Marginal Relief on Surcharge levied on Individuals/ HUF/ AoP/BoI/AJP
|
Where Total Income exceeds Rs. 50,00,000
|
Total amount payable as income-tax and surcharge on such income shall not exceed the total amount payable as income-tax on a total income of Rs. 50,00,000 by more than the amount of income that exceeds Rs. 50,00,000.
|
Where Total Income exceeds Rs. 1,00,00,000
|
Total amount payable as income-tax and surcharge on such income shall not exceed the total amount payable as income-tax and surcharge on a total income of Rs. 1 crore by more than the amount of income that exceeds Rs. 1 crore.
|
Where Total Income exceeds Rs.
|
Total amount payable as income-tax and surcharge on such income shall not exceed the total amount payable as income-tax on a total income of Rs. 2 crore by more than the amount of income that exceeds Rs. 2 crore.
|
Where Total Income exceeds Rs. 5,00,00,000
|
Total amount payable as income-tax and surcharge on such income shall not exceed the total amount payable as income-tax and surcharge on a total income of Rs. 5 crore by more than the amount of income that exceeds Rs. 5 crore.
|
A brief note on the Computation of tax liability:
Case 1: If the Total Income of an Individual below 60 years of age and who is a resident in India during FY 2019-20 is expected at (i) Rs. 3,50,000 and (ii) Rs. 5,00,000 for demonstrating how the Rebate u/s 87A is computed and allowed.
Total Income
|
Rs. 3,50,000
|
Rs. 5,00,000
|
Tax on Total Income
|
Rs. 5,000
|
Rs. 12,500
|
Less: Rebate u/s 87A
|
Rs. 5,000
|
Rs. 12,500
|
Net Tax Liability
|
Nil
|
Nil
|
How to compute the income-tax
|
||
On first Rs. 2,50,000
|
Nil
|
Nil
|
On next Rs. 1,00,000
(Rs. 3,50,000-2,50,000) @ 5%
|
Rs.
5,000
|
-
|
On next Rs. 2,50,000
(Rs. 5,00,000-2,50,000) @ 5%
|
-
|
Rs.
12,500
|
Rebate u/s 87A is allowed from the basic tax amount before applying the Health & Education Cess.
No surcharge will apply because of the reason that the total income is below Rs. 50 Lakh.
Case 2: If the Total Income of an Individual below 60 years of age and who is a resident in India during FY 2019-20 is expected at (i) Rs. 51,00,000 and (ii) Rs. 91,00,000 for demonstrating how Surcharge and Marginal Relief is computed and allowed.
Total Income
|
Rs. 51,00,000
|
Rs. 91,00,000
|
Tax on Total Income
|
Rs. 13,42,500
|
Rs. 25,42,500
|
Less: Rebate u/s 87A
|
Nil
|
Nil
|
Add: Surcharge @ 10%
|
Rs. 1,34,250
|
Rs. 2,54,250
|
Less: Marginal Relief
from Surcharge
|
Rs. 64,250
|
Nil
|
Tax after Surcharge
|
Rs. 14,12,500
|
Rs. 27,96,750
|
Add: Health and Education
Cess @ 4%
|
Rs. 56,500
|
Rs. 1,11,870
|
Net Tax Liability
|
Rs. 14,69,000
|
Rs. 29,08,620
|
|
How to
compute the income-tax
|
||
|
On first Rs. 2,50,000
|
Nil
|
Nil
|
|
On next Rs. 2,50,000
(Rs. 5,00,000-2,50,000) @ 5%
|
Rs. 12,500
|
Rs. 12,500
|
|
On next Rs. 5,00,000
(Rs. 10,00,000-5,00,000) @ 20%
|
Rs. 1,00,000
|
Rs. 1,00,000
|
|
On next Rs. 41,00,000
(Rs. 51,00,000-10,00,000) @ 30%
|
Rs. 12,30,000
|
-
|
|
On next Rs. 81,00,000
(Rs. 91,00,000-10,00,000) @ 30%
|
-
|
Rs. 24,30,000
|
Computation showing an increase in the tax liability of an Individual due to an increase in the rate of surcharge for AY 2020-21:
In the Budget Speech 2019, the Finance Minister informed that they had taken several measures in the past to alleviate the tax burden on small and medium income-earners as those having an annual income up to Rs. 5 lakh is not required to pay any income-tax. She thanked the taxpayers who played a major role in nation building by paying their taxes. However, in view of rising income levels, those in the highest income brackets, need to contribute more to the Nation’s development. She, therefore, proposed to enhance surcharge on individuals having taxable income from Rs. 2 crore to Rs. 5 crore and Rs. 5 crore and above so that effective tax rates for these two categories would increase by around 3 % and 7 % respectively. This is how effective tax rate is computed.
Particulars
|
Tax before Budget 2019
|
Tax after Budget 2019
|
Tax before Budget 2019
|
Tax after Budget 2019
|
Total Income
|
2,50,00,000
|
2,50,00,000
|
7,50,00,000
|
7,50,00,000
|
Tax on Total Income
|
73,12,500
|
73,12,500
|
2,23,12,500
|
2,23,12,500
|
Less: Rebate u/s 87A
|
Nil
|
Nil
|
Nil
|
Nil
|
Add: Surcharge
|
10,96,875
|
18,28,125
|
33,46,875
|
82,55,625
|
Tax after Surcharge
|
84,09,375
|
91,40,625
|
2,56,59,375
|
3,05,68,125
|
Add: Health & Edu.
Cess @
4%
|
3,36,375
|
3,65,625
|
10,26,375
|
12,22,725
|
Net Tax Liability
|
87,45,750
|
95,06,250
|
2,66,85,750
|
3,17,90,850
|
Increase
in Tax Liability
|
7,60,500
|
51,05,100
|
||
Effective
increase in Tax Rate
|
3.04%
|
6.81%
|
In effect, the additional increase in Surcharge from 15 per cent to 25 per cent comes to 10 per cent. At the highest tax rate of 30 per cent, it translates to an additional tax rate of 3 per cent. Similarly, the additional increase in Surcharge from 15 per cent to 37 per cent comes to 22 per cent. At the highest tax rate of 30 per cent, it translates to an additional tax rate of 6.6 per cent.
The abstract of 'New Tax Benefits' available to Individual taxpayers for the AY 2020-21 considering both the Interim Budget 2019 and Union Budget 2019:
1. Rebate of Rs. 12,500 from tax: Individual taxpayers having a taxable annual income up to Rs. 5 lakhs will get full tax rebate and therefore will not be required to pay any income tax.
2. Raising the limit for Standard Deduction: For salaried persons, Standard Deduction is being raised from the current Rs. 40,000 to Rs. 50,000.
3. Two self-occupied house property without any notional tax: Levy of income tax on notional rent on a second self-occupied house is made exempt.
4. Increase in TDS threshold limit for interest and rent: TDS threshold on interest earned on bank/post office deposits is being raised from Rs. 10,000 to Rs. 40,000.
5. Increase in exemption limit under section 54: The benefit of rollover of capital gains under section 54 of the Income Tax Act will be increased from investment in one residential house to two residential houses for a taxpayer having capital gains up to Rs. 2 crore. This benefit can be availed once in a lifetime.
6. Increase in Surcharge rate: New surcharge rates for AY 2020-21 are introduced for Individuals, HUF, AoP, BoI, and Artificial Judicial Person (AJP) as mentioned above.
7. Deduction u/s 80EEA on interest on loan for affordable housing: A new section 80EEA is inserted to provide for deduction of interest on loan taken from any financial institution for acquiring a residential house property. The maximum amount of deduction allowed is Rs. 1,50,000 and the value of the residential house, based on stamp duty value, shall not exceed Rs. 45 lakh. Moreover, the loan shall be sanctioned in the FY 2019-20 and the taxpayer shall the first time buyer of any residential house.
This shall be in addition to the existing interest deduction of Rs. 2 lakh under section 24.
8. Deduction u/s 80EEB on interest on loan for purchase of electric vehicle: A new section 80EEB is inserted to provide for deduction of interest on loan taken from any financial institution for purchasing an electric vehicle. The maximum amount of deduction allowed is Rs. 1,50,000.
An Individual, with proper tax planning, can escape tax even if his Total Income is more than Rs. 13 Lakh in AY 2020-21 as shown below. It is surprising but feasible, though may not apply in all cases.
|
Particulars
|
Amount (in Rs.)
|
|
Gross Income from Salary
|
13,02,400
|
|
Less: Standard Deduction
|
50,000
|
|
Less: Professional Tax
|
2,400
|
|
Income from Salary
|
12,50,000
|
|
Income from House Property
|
|
|
Interest paid on home loan
(affordable housing) |
(-) 2,00,000
|
|
Gross Total Income (A)
|
10,50,000
|
|
Less:Deduction u/c VI-A
|
|
|
U/s 80C
|
1,50,000
|
|
U/s 80CCD(1B)
|
50,000
|
|
U/s 80D
|
50,000
|
|
U/s 80EEA
|
1,50,000
|
|
U/s 80EEB
|
1,50,000
|
|
Total Deduction (B)
|
5,50,000
|
|
Taxable Income [(A)-(B)]
|
5,00,000
|
|
Tax on Rs. 5 Lakh
|
12,500
|
|
Less: Rebate u/s 87A
|
12,5000
|
|
Net Tax Payable
|
Nil
|
Click here for the Income Tax Calculator to compute your income tax liability for AY 2020-21.
Table-4
Category of Taxpayer
|
Co-operative Society
|
Residential Status
|
Resident
|
Total Income
|
Income-Tax Rate
|
Up to Rs. 10,000
|
10%
|
Rs. 10,001 to Rs. 20,000
|
20%
|
Above Rs. 20,000
|
30%
|
Important:
| |
Surcharge on Income-tax for Co-operative Society:
|
Cases covering Table-4
|
Where Total Income exceeds Rs. 1,00,00,000
|
12%
|
Health & Education Cess on Income-tax and Surcharge for Co-operative Society:
|
Cases covering Table-4
|
Health & Education Cess
|
4%
|
Marginal Relief on Surcharge
|
Where Total Income exceeds Rs. 1,00,00,000
|
Total amount payable as income-tax and surcharge on such income shall not exceed the total amount payable as income-tax and surcharge on a total income of Rs. 1 crore by more than the amount of income that exceeds Rs. 1 crore.
|
Table-5
Category of Taxpayer
|
Partnership Firms and LLP
|
Residential Status
|
Resident
|
Particulars
|
Income-Tax Rate
|
Tax rate for Partnership firms & LLP
|
30%
|
Important:
| |
Surcharge on Income-tax for Partnership Firms & LLP:
|
In all cases covering Table-5
|
Where Total Income exceeds Rs. 1,00,00,000
|
12%
|
Health & Education Cess on Income-tax and Surcharge for Partnership Firms & LLP:
|
In all cases covering Table-5
|
Health & Education Cess
|
4%
|
Marginal Relief on Surcharge
|
Where Total Income exceeds Rs. 1,00,00,000
|
Total amount payable as income-tax and surcharge on such income shall not exceed the total amount payable as income-tax and surcharge on a total income of Rs. 1 crore by more than the amount of income that exceeds Rs. 1 crore.
|
Table-6
Category of Taxpayer
|
Local Authority
|
Residential Status
|
Resident
|
Total Income
|
Income-Tax Rate
|
Tax rate for Local Authority
|
30%
|
Important:
| |
Surcharge on Income-tax for Local Authority:
|
Cases covering Table-6
|
Where Total Income exceeds Rs. 1,00,00,000
|
12%
|
Health & Education Cess on Income-tax and Surcharge for Local Authority:
|
Cases covering Table-6
|
Health & Education Cess
|
4%
|
Marginal Relief on Surcharge
|
Where Total Income exceeds Rs. 1,00,00,000
|
Total amount payable as income-tax and surcharge on such income shall not exceed the total amount payable as income-tax and surcharge on a total income of Rs. 1 crore by more than the amount of income that exceeds Rs. 1 crore.
|
Table-7
Category of Taxpayer
|
Domestic Company
|
Residential Status
|
Resident
|
Particulars
|
Income-Tax Rate
|
Total turnover or gross receipts during the previous year 2017-18 is up to Rs. 400 Crore
|
25%
|
Other domestic companies
|
30%
|
Domestic companies opting Sec. 115BA
|
25%
|
Table-8
Category of Taxpayer
|
Foreign Company
|
Residential Status
|
Non-Resident
|
Particulars
|
Income-Tax Rate
|
Tax rate for foreign companies
|
40%
|
Important:
| ||
Surcharge on Income-tax for Companies:
|
Domestic Company
|
Foreign Company
|
Total Income is up to Rs. 1 crore
|
Nil
|
Nil
|
Total Income is Rs. 1 crore to Rs. 10 crore
|
7%
|
2%
|
Total Income exceeds Rs. 10 crore
|
12%
|
5%
|
Health & Education Cess on Income-tax and Surcharge for Companies:
|
In all cases covering Table-7 & 8 above
|
Health & Education Cess
|
4%
|
Marginal Relief on Surcharge
|
Where Total Income is Rs. 1 crore to Rs. 10 crore
|
Total amount payable as income-tax and surcharge on such income shall not exceed the total amount payable as income-tax and surcharge on a total income of Rs. 1 crore by more than the amount of income that exceeds Rs. 1 crore.
|
Where Total Income exceeds Rs. 10 crore
|
Total amount payable as income-tax and surcharge on such income shall not exceed the total amount payable as income-tax and surcharge on a total income of Rs. 10 crore by more than the amount of income that exceeds Rs. 10 crore.
|
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