India has a progressive tax system, meaning that the more money earned, the more tax is levied. Taxation in India is based on Income Tax slabs to govern the same. The amount of income, type of taxpayer, residential status, and age are the main determinants of whether the income tax slab is applicable.
Income tax is imposed on every individual, HUF, corporation, LLP, and capital income in India. If an individual’s income goes over the minimum threshold limit, they come under the slab system of taxation. This threshold is also known as the “basic exemption limit.”
What is Income Tax Slab?
The Indian taxation system divides taxpayers into many income groups. It makes taxation simplified and more equitable. For example, a person earning Rs 3,00,000 per year doesn’t pay the same amount of tax as someone earning Rs 30,00,000 per year. The tax slab system categorises taxpayers based on their income and levies tax accordingly.
No changes were made to the income tax slabs in the proposed budget for 2022. Budget 2020 included a new income tax regime, which became effective in the 2020–21 fiscal year. The old tax regime offered a variety of exemptions and deductions. The new tax regime gives reduced tax rates at the expense of fewer exemptions and deductions. Both options are available to taxpayers. In this article, we will look at the income tax slab rates under both new and old tax regimes for the fiscal year 2021–2022.
Tax Payers Under Income Tax Slab 2021-2022
The income tax slab rates for FY 2021–22 extend beyond simply individual taxpayers to several different entities that must abide by the Income Tax Act of 1961’s taxation regulations. Groups that fall under the current income tax or professional tax regulations include:
2. Hindu Undivided Family (HUF)
3. Association of Persons (AOP)
4. Body of Individuals (BOI)
8. Artificial Judicial Person
Income Tax Slab Rates 2021-2022
Currently, taxpayers have two options, i.e., to continue paying taxes at the current tax rates or to pay income tax at reduced rates applicable to the new tax regime. Taxpayers must give up some exemptions and deductions if they choose the new tax regime. However, they are eligible for deductions and exemptions if they go with the previous system and pay tax at the current higher rate.
Income Tax Slab 2021-2022 Under New Tax Regime
|Income Tax Slab||New Regime Slab Rates Applicable for All Individuals or HUF|
|Rs 0.0 to Rs 2.5 Lakhs||NIL|
|Rs 2,50,001 to Rs 3.00 Lakhs||5% (tax rebate u/s 87a is available)|
|Rs. 3,00,001 to Rs 5.00 Lakhs|
|Rs. 5,00,001 to Rs 7.5 Lakhs||10%|
|Rs 7,50,001 to Rs 10.00 Lakhs||15%|
|Rs 10,00,001 to Rs. 12.50 Lakhs||20%|
|Rs. 12,50,001 to Rs. 15.00 Lakhs||25%|
|Exceeding Rs. 15 Lakhs||30%|
Income Tax Slab 2021-2022 Under Old Tax Regime
|Income Tax Slab||Rate of Tax under Existing Regime|
|Individuals Below 60 Years of Age or HUF||Individuals Between 60 and 80 Years of Age||Individuals over Age 80|
|Rs 0.0 to Rs 2.5 Lakhs||NIL||NIL||NIL|
|Rs 2,50,001 to Rs 3.00 Lakhs||5% (tax rebate u/s 87a is available)||NIL||NIL|
|Rs. 3,00,001 to Rs 5.00 Lakhs||5% (tax rebate u/s 87a is available)||NIL|
|Rs. 5,00,001 to Rs 7.5 Lakhs||20%||20%||20%|
|Rs 7,50,001 to Rs 10.00 Lakhs||20%||20%||20%|
|Rs 10,00,001 to Rs. 12.50 Lakhs||30%||30%||30%|
|Rs. 12,50,001 to Rs. 15.00 Lakhs||30%||30%||30%|
|Exceeding Rs. 15 Lakhs||30%||30%||30%|
Old Tax Regime Vs New Tax Regime, which is Better?
The new Indian tax regime works better for individuals with the middle-class income slab, i.e., up to Rs 15 lakhs. The old Indian tax regime is better for those having a high income.
Seven lower-income tax slabs are included in the new tax regime, which is favourable for taxpayers who make little investments. The new tax system that was proposed in 2020 provides some assistance to Indian cooperative societies, HUFs, senior citizens, and salaried people.
Taxpayers with a substantial investment portfolio and who have invested in tax-saving strategies should choose the previous tax system. The old tax regime offers a higher tax deduction and lower tax outlay. The investment portfolio may include health and life insurance, ULIP, children’s tuition, EMI, mortgage/home loan, etc.
Things to Consider While Choosing the New Tax Regime
The deductions and exemptions available under the old tax regime will no longer be available to taxpayers who choose lower rates under the new regime. There are a total of 70 exemptions and deductions that are unavailable.
No changes were made for the LLPs or partnership companies. Also, domestic businesses and cooperative societies will need to be aware that many of the deductions they were formerly entitled to under the previous tax regime are no longer available under the new one.
Exemptions/Deductions Unavailable Under the New Tax Regime
- House Rent Allowance (HRA)
- Relocation allowance
- Conveyance allowance
- Leave Travel Allowance (LTA)
- Standard deduction on salary
- Allowance for children’s education
- Helper allowance
- Daily expenses during employment
- Interest on housing loan (Section 24)
- Professional tax
- Other special allowances [Section 10(14)]
- Deduction under Chapter VI-A (80C,80D, 80E and so on) (Except Section 80CCD (2))
Exemptions/Deductions Available Under the New Tax Regime
- Conveyance allowance for costs related to work commute
- Any allowance for travel related to employment or a transfer
- Transport allowance for specially-abled people
- Investment in Notified Pension Scheme U/S80CCD (2)
- Deduction for hiring new employees under section 80JJAA under section 80JJAA
- Depreciation U/S 32 of the Income Tax Act, except for additional depreciation
Determine your tax liability under both regimes with and without deductions and exemptions. Overall, you must compare and evaluate the two regimes to select the most suitable one for you. Depending on your needs, the tax regime that results in the lowest tax liability would be preferable. However, we suggest you go with the old tax regime if you are a significant tax planner.