Every year after the presentation of the 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 how much he has saved.
The Union Budget announces the tax slab and tax rates ahead of the commencement of the next financial year. The Union Budget 2021 is presented on February 1, 2021. Various tax proposals were announced in the Budget 2020 and proposals are contained in the Finance Bill, 2021 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 on 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'.
A 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 are called '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 sets 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 the Union Budget, 2021 was presented on 1st February 2021.
Thus, the Union Budget, 2021 was presented on 1st February 2021 and the Finance Bill, 2021 was introduced.
The Finance Bill, 2021 will contain the tax rates for FY 2020-21 (current year) as well as the tax rates for FY 2021-22 (forthcoming FY).
In the next Budget in February 2022, the tax rates provided for the forthcoming FY 2021-22 in the Finance Act, 2021 will become the tax rates for the current FY 2021-22 and will also contain the tax rates for forthcoming FY 2022-23. This is how the tax rates are prescribed in the law.
As stated above, the Finance Bill, 2021 provides two sets of tax rates-
One for the current FY 2020-21 (February 2021 falls in the FY 2020-21), and another one is for the forthcoming FY 2021-22.
It is pertinent to note that the Finance Bill, 2021 has not changed the income tax rates as applicable to all the assessees for the AY 2022-23 (FY 2021-22). The same rate of income tax and income slab, as prescribed by the Finance (No. 2) Act, 2019 and the Taxation Laws (Amendment) Act, 2019, shall be continued in AY 2022-23.
This is except for the new optional simplified income tax rate introduced for individuals and HUFs and a resident co-operative society.
Finance Bill, 2020 had introduced two new sections - Section 115BAC and section 115BAD in the Income Tax Act, 1961 to provide for the optional simplified income tax rates for individual and HUF taxpayers and a resident co-operative society. The new optional simplified income tax rate was made applicable from the assessment year 2021-22 (FY 2020-21).
Applicable Income Tax Slab Rates for AY 2022-23 (FY 2021-22) 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.
New optional simplified income tax rates for Individual and HUF only under section 115BAC
Table-A
Sl. No. | Total income | Rate of tax |
1. | Upto Rs 2,50,000 | Nil |
2. | From Rs 2,50,001 to Rs 5,00,000 | 5 percent |
3. | From Rs 5,00,001 to Rs 7,50,000 | 10 percent |
4. | From Rs 7,50,001 to Rs 10,00,000 | 15 percent |
5. | From Rs 10,00,001 to Rs 12,50,000 | 20 percent |
6. | From Rs 12,50,001 to Rs 15,00,000 | 25 percent |
7. | Above Rs 15,00,000 | 30 percent |
A comparative tax rate chart under both the old regime and the optional new regime is given for ready reference-
Sl. No. | Total income | Rate of tax (Under Old Regime) | Rate of tax (Under New Regime) |
1. | Upto Rs 2,50,000 | Nil | Nil |
2. | From Rs 2,50,001 to Rs 5,00,000 | 5 percent | 5 percent |
3. | From Rs 5,00,001 to Rs 7,50,000 | 20 percent | 10 percent |
4. | From Rs 7,50,001 to Rs 10,00,000 | 15 percent |
5. | From Rs 10,00,001 to Rs 12,50,000 |
30 percent
| 20 percent |
6. | From Rs 12,50,001 to Rs 15,00,000 | 25 percent |
7. | Above Rs 15,00,000 | 30 percent |
The following rate of Surcharge, Marginal Relief, Health & Education Cess and the Rebate u/s 87A shall be applicable to the old regime and the optional new regime.
Sl | Quantum of Total Income | Rate of Surcharge |
(a) | Where the total income (including the income under the provisions of section 111A and section 112A ) exceeds Rs. 50 Lakh but does not exceed Rs. 1.0 Crore | 10% |
(b) | Where the total income (including the income under the provisions of section 111A and section 112A) exceeds Rs. 1.0 Crore but does not exceed Rs. 2.0 Crore | 15 % |
(c) | Where the total income (excluding the income under the provisions of section 111A and section 112A) exceeds Rs. 2.0 Crore but does not exceed Rs. 5.0 Crore | 25 % |
(d) | Where the total income (excluding the income under the provisions of section 111A and section 112A) exceeds Rs. 5.0 Crore | 37% |
(e) | Where the total income (including the income under the provisions of section 111A and section 112A) exceeds Rs. 2.0 Crore, but is not covered under clauses (c) and (d) | 15% |
An exceptional provision is provided where the total income includes any income chargeable under section 111A and section 112A of the Income-tax Act, the rate of surcharge on the amount of income-tax computed on that part of the income shall not exceed 15 percent.
[Rate of above-mentioned Surcharge as amended by the Taxation Laws (Amendment) Act, 2019]
Important: |
Health & Education Cess on Income-tax and Surcharge for Individuals/ HUF/AoP/BoI/AJP: | In all cases covering Table-1/2/3/A above |
Health & Education Cess | 4% |
Important: |
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. 2,00,00,000 |
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. 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. |
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. |
New optional simplified income tax rates for a resident co-operative society only under section 115BAD
Table-B
Tax rate for resident co-operative society under section 115BAD | 22% |
Surcharge on a resident co-operative society if section 115BAD is opted | 10% |
Note: No marginal relief is applicable under this option. |
Health & Education Cess | 4% |
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% |
Minimum Alternative Tax on Book Profit (MAT) | 15% |
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. |
Optional Corporate income-tax rates for Assessment Year 2021-22 [introduced by the Taxation Laws (Amendment) Act, 2019]
Table-C
Category of Taxpayer | Domestic Company |
Domestic companies opting Sec. 115BAA | 22% |
|
|
Minimum Alternative Tax on Book Profit | Rate of MAT |
MAT on Book Profit | 0 % (Nil) |
|
|
Surcharge on Income-tax for Companies: | Rate of Surcharge |
Surcharge at a flat rate | 10% |
|
|
Health & Education Cess on Income-tax and Surcharge for Companies | In all cases covering Table-2 above |
Health & Education Cess | 4% |
Marginal Relief on Surcharge and MAT Credit u/s 115JAA |
Not Available |
Table-D
Category of Taxpayer | Domestic Company |
Domestic companies opting Sec. 115BAB |
Income from manufacturing activity | 15% |
Other Income (not specified in Chapter-XII) | 22% |
Excess Income from related parties | 30% |
STCG from non-depreciable assets | 22% |
|
|
Minimum Alternative Tax on Book Profit | Rate of MAT |
MAT on Book Profit | 0 % (Nil) |
|
|
Surcharge on Income-tax for Companies: | Rate of Surcharge |
Surcharge at a flat rate | 10% |
|
|
Health & Education Cess on Income-tax and Surcharge for Companies | In all cases covering Table-2 above |
Health & Education Cess | 4% |
Marginal Relief on Surcharge and MAT Credit u/s 115JAA |
Not Available |
Conclusion
It may be noted that the New Corporate Income Tax Rates mentioned in Table-C and Table-D are optional to a domestic company. If such a company does not opt for reduced New Corporate Income Tax Rates then it may continue to pay as per tax rates specified in Table-7.
Further, it may be noted that Surcharge on income-tax in Table-C and Table-D is applicable without any threshold limit of total income.
0 Comments