Income Tax Taxation

All you need to know about Income Tax Slab Rate for FY 2021-22

Income tax is a direct tax that applies to individuals earning income based on salary & other sources. The Finance Minister presents in the budget income tax rate every year. In this article, we will cover the income tax slab rate for FY 2021 – 22.

What is Income Tax Slab?

Income tax is a tax levied on taxpayers based on the slab system set by the government every year, and the slab rate is communicated to the public through a budget presented at the end of an FY.

The slab tax rate is different tax rates prescribed for various income ranges, which means the tax rates increases with an increase in the taxpayer’s income.

Income tax has classified 3 categories of individual taxpayers. The categories are:

• Individuals less than 60 years that includes residents & non – residents;
• Senior citizens between 60 years & 80 years;
• Super senior citizens more than 80 years.

Income Tax Slab Rate for FY 2021-22

The Income tax slab rate for an FY 2021 – 22 is:

Income Tax Slab	New regime Income Tax Slab Rate for FY 2020 – 21 (applies to all individuals & HUF)
Up to Rs. 2,50,000	Nil
Between Rs. 2,50,000 & Rs. 3,00,000	5% (tax rebate under section 87a is available)
Between Rs. 3,00,000 & Rs. 5,00,000	5% (tax rebate under section 87a is available)
Between Rs. 5,00,000 & Rs. 7,50,000	10%
Between Rs. 7,50,000 & Rs. 10,00,000	15%
Between Rs.10,00,000 & Rs. 12,50,000	20%
Between Rs. 12,50,000 & Rs. 15,00,000	25%
More than Rs. 15,00,000	30%

A few points to be noted:

• No increased exemption benefit is available to any of the categories of the taxpayer.
• Basic exemption of Rs. 2,50,000 is given to NRI
• An additional 4% health &education cess will apply on the tax amount.
• The surcharge will also apply:
  • 10% of income tax, when the total income is less than Rs. 50 lakh
  • 15% of income tax, when the income is less than Rs. 1 crore
  • 25% of income tax, when the income is less than Rs. 2 crore
  • 37% of income tax, when the income is less than Rs. 5 crore

Why is the income tax slab rate for FY 2021-22 optional?

The taxpayer has the option to choose either:

• To pay the income tax at a lower rate as per the new tax regime on a condition that the taxpayer has to forgo the exemptions & deductions available under the income tax; or
• To continue to pay taxes on the current tax rates & can avail the rebates & exemptions by choosing the old regime & pay tax at a higher rate.

What is the old tax regime for FY 2021?

The old tax regime for FY 2021-22 for the category of taxpayers are:

Income Tax Slab	Individuals less than 60 years	Senior citizens between 60 years & 80 years	Super senior citizens above 80 years
Up to Rs. 2,50,000	Nil	Nil	Nil
Between Rs. 2,50,000 & Rs. 5,00,000	5%	5%	Nil
Between Rs. 5,00,000 & Rs. 10,00,000	20%	20%	20%
More than Rs. 10,00,000	30%	30%	30%

There are few points to be noted:

• An additional 4% health & education cess will apply to the tax amount.
• The surcharge will also apply:
  • 10% of income tax, when the total income ranges between Rs. 50 lakhs & Rs 1 crore.
  • 15% of income tax, when the income is above Rs. 1 crore.

New Income Tax regime vs Old Income Tax regime

The difference between the new & old tax regime is:

Income Tax Slab	Existing regime tax rate slab for FY 2020-21& FY 2021-22			New regime tax rate slab for FY 2021-22
	Resident Individuals & HUF less than 60 years of age & NRI	Resident Individuals & HUF above 60 years & less than 80 years	Resident Individuals & HUF above 80 years of age	Applies to all individuals & HUF
Up to Rs. 2,50,000	Nil	Nil	Nil	Nil
Between Rs. 2,50,000 &Rs. 3,00,000	5% (tax rebate u/s 87a is available)	Nil	Nil	5% (tax rebate u/s 87a is available)
Between Rs. 3,00,000 & Rs. 5,00,000	5% (tax rebate u/s 87a is available)	5% (tax rebate u/s 87a is available)	Nil	5% (tax rebate u/s 87a is available)
Between Rs. 7,50,000 & Rs. 10,00,000	20%	20%	20%	15%
Between Rs. 10,00,000 & Rs. 12,50,000	30%	30%	30%	20%
Between Rs. 12,50,000 & Rs. 15,00,000	30%	30%	30%	25%
More than Rs. 15,00,000	30%	30%	30%	30%

How to calculate Income Tax from Income Tax Slabs?

Let us understand how to calculate income tax from income tax slab rates through an example.

Akash has a total taxable income of Rs. 8 lakhs, calculated by including all the incomes from salary, rental, and interest income. The amount has also been deducted under section 80 of the Act.

Now, as per the income tax rate slab, the income tax is calculated as:

Income Tax Slabs	Tax Rate	Tax calculation
Income up to Rs. 2,50,000	No tax	—
Income between Rs. 2,50,000 & Rs. 5,00,000	5% (Rs. 5,00,000 – Rs. 2,50,000)	Rs. 12,500
Income between Rs. 5,00,000 & Rs. 10,00,000	20% (Rs. 5,00,000 – Rs. 5,00,000)	Rs. 60,000
Income more than Rs. 10,00,000	30%	Nil
Tax		Rs. 72,500
Cess	4% of Rs. 72,500	Rs. 2,900
Total tax payable		Rs. 75,400

Akash is an individual taxpayer, having Rs. 2, 50,000 as income tax exemption. For other taxpayers, i.e., senior & super senior citizens, Rs. 3, 00,000 & Rs. 5, 00,000 respectively, avail income tax exemption.

Conclusion

Income tax is levied on every taxpayer’s taxable income earned from salary, rent, or other sources. The tax is calculated based on the income tax slab rate. Thus, it is very important for the taxpayers^[1] to know about the slab rates.

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