Union Budget 2020 has introduced a new Income Tax Slabs for FY 2020-21 (AY 2021-22). It has also proposed a new tax regime slashing income tax rates to reduce total tax payable by the individual taxpayers. So. I thought to write a blog post on Income Tax Slabs for FY 2020-21 (AY 2021-22).
The new income tax slabs and rates come with a catch, the individual taxpayers will have to let go of exemptions. In simple words, you will have to let go of 70 tax exemptions and deductions to avail the new tax regime.
However, the new income tax regime is optional. You will have the option to choose between the current income tax regime and the new regime.
Table of Contents
What is the Income Tax?
Income Tax is a direct tax in India. It is levied directly on your income by the government. The income from your salary, profession, business or other sources is taxed on the basis of a slab system.
Primary Sources of Income
Income from the following sources is considered taxable in India:
1) Salary
2) From house property
3) Profits and gains of business and profession
4) Capital gains
5) Income from other sources
Also Read: List of Banks in India
Also Read: How to invest in Direct Mutual Funds in India?
Income Tax Slabs for FY 2020-21 (AY 2021-22)
In India, income tax is levied directly on individual taxpayers. It is charged on the basis of a slab system prescribed by the Government of India in the budget every financial year.
There are different tax rates for different slabs. The tax rates keep increasing with an increase in the income slab. The tax slabs tend to undergo a change in the budget every financial year.
Categories of Individual Taxpayers
Currently, the income tax rate on resident individuals varies on the basis of their age in India. Therefore, there are three categories of individual taxpayers:
1. Individuals below the age of 60 years.
2. Senior citizens (Age above 60 years but below 80 years)
3. Super senior citizens (Age above 80 years)
Income Tax Slabs for FY 20120-21 (AY 2021-22)
The tables given below are the latest income tax slabs & rates applicable for the Financial Year 2020-21 (Assessment Year 2021-22). No separate income tax slabs for men and women. As of today, there are three income tax slabs based on age.
Slab for Individuals below the age of 60 years
New Tax Slab without exemptions
| Income Slab | Tax Rate |
| Income up to Rs. 2,50,000 | No Tax |
| Income between Rs. 2,50,001 – Rs. 5,00,000 | 5% |
| Income between Rs. 5,00,001 – Rs. 7,50,000 | 10% |
| Income between Rs. 7,50,001 – Rs. 10,00,000 | 15% |
| Income between Rs. 10,00,001 – Rs. 12,50,000 | 20% |
| Income between Rs. 12,50,001 – Rs. 15,00,000 | 25% |
| Income above Rs. 15,00,000 | 30% |
Tax Slab with exemptions
| Income Slab | Tax Rate |
| Income up to Rs. 2,50,000 | No Tax |
| Income between Rs. 2,50,001 – Rs. 5,00,000 | 5% |
| Income between Rs. 5,00,001 – Rs. 10,00,000 | 20% |
| Income above Rs. 10,00,000 | 30% |
Surcharge o Income Tax:
- 10% surcharge, where the total income exceeds Rs. 50 lakhs up to Rs. 1 crore.
- 15% surcharge, where the total income exceedsRs. 1 crore but below Rs. 2 crores.
- 25% surcharge, where the total income exceeds Rs. 2 crores but below Rs. 5 crores.
- 37% surcharge, where the total income exceeds Rs. 5 crores.
Health and Education Cess:
- 4% Health and Education cess on the income tax and applicable surcharge.
Rebate through Section 87A:
- Rs. 12,500 or full tax rebate (whichever is lower) for individuals earning a net taxable income up to Rs. 5 lakhs.
Slab for Senior Citizens (Age above 60 years but below 80 years)
New Tax Slab without exemptions
| Income Slab | Tax Rate |
| Income up to Rs. 2,50,000 | No Tax |
| Income between Rs. 2,50,001 – Rs. 5,00,000 | 5% |
| Income between Rs. 5,00,001 – Rs. 7,50,000 | 10% |
| Income between Rs. 7,50,001 – Rs. 10,00,000 | 15% |
| Income between Rs. 10,00,001 – Rs. 12,50,000 | 20% |
| Income between Rs. 12,50,001 – Rs. 15,00,000 | 25% |
| Income above Rs. 15,00,000 | 30% |
Tax Slab with exemptions
| Income Slab | Tax Rate |
| Income up to Rs. 3,00,000 | No Tax |
| Income between Rs. 3,00,001 – Rs. 5,00,000 | 5% |
| Income between Rs. 5,00,001 – Rs. 10,00,000 | 20% |
| Income above Rs. 10,00,000 | 30% |
Surcharge o Income Tax:
- 10% surcharge, where the total income exceeds Rs. 50 lakhs up to Rs. 1 crore.
- 15% surcharge, where the total income exceedsRs. 1 crore but below Rs. 2 crores.
- 25% surcharge, where the total income exceeds Rs. 2 crores but below Rs. 5 crores.
- 37% surcharge, where the total income exceeds Rs. 5 crores.
Health and Education Cess:
- 4% Health and Education cess on the income tax and applicable surcharge.
Rebate through Section 87A:
- Rs. 12,500 or full tax rebate (whichever is lower) for individuals earning a net taxable income up to Rs. 5 lakhs.
Basic Exemption:
- Basic exemption under the new tax regime is 2.5 lakhs against 3 lakhs in the old tax regime.
Slab for Super Senior Citizens (Age above 80 years)
New Tax Slab without exemptions
| Income Slab | Tax Rate |
| Income up to Rs. 2,50,000 | No Tax |
| Income between Rs. 2,50,001 – Rs. 5,00,000 | 5% |
| Income between Rs. 5,00,001 – Rs. 7,50,000 | 10% |
| Income between Rs. 7,50,001 – Rs. 10,00,000 | 15% |
| Income between Rs. 10,00,001 – Rs. 12,50,000 | 20% |
| Income between Rs. 12,50,001 – Rs. 15,00,000 | 25% |
| Income above Rs. 15,00,000 | 30% |
Tax Slab with exemptions
| Income Slab | Tax Rate |
| Income up to Rs. 5,00,000 | No Tax |
| Income between Rs. 5,00,001 – Rs. 10,00,000 | 20% |
| Income above Rs. 10,00,000 | 30% |
Surcharge o Income Tax:
- 10% surcharge, where the total income exceeds Rs. 50 lakhs up to Rs. 1 crore.
- 15% surcharge, where the total income exceedsRs. 1 crore but below Rs. 2 crores.
- 25% surcharge, where the total income exceeds Rs. 2 crores but below Rs. 5 crores.
- 37% surcharge, where the total income exceeds Rs. 5 crores.
Health and Education Cess:
- 4% Health and Education cess on the income tax and applicable surcharge.
Rebate through Section 87A:
- Rs. 12,500 or full tax rebate (whichever is lower) for individuals earning a net taxable income up to Rs. 5 lakhs.
Basic Exemption:
- Basic exemption under the new tax regime is 2.5 lakhs against 5 lakhs in the old tax regime.
List of Exemptions removed from New Tax Regime
Finance Minister Nirmala Sitharaman said that 70 out of 100 tax exemptions available to taxpayers in the old regime will not be available in the new simplified tax regime. However, the new tax regime will be optional and you can continue with the old regime if you desire so.
List of Exemptions removed
Some important exemptions and deductions you won’t get in the new simplified tax regime.
1. Leave travel concession
2. House Rent Allowance (HRA paid to salaried individuals as part of salary)
3. Some of the allowance as contained in clause (14) of section 10;
4. Allowance for the income of minor as contained in clause (32) of section 10;
5. The standard deduction, the deduction for entertainment allowance and employment/professional tax.
6. Interest under section 24 in respect of self-occupied or vacant property referred to in sub-section (2) of section 23.
7. Additional deprecation under clause (iia) of sub-section (1) of section 32;
8. Deductions under section 32AD, 33AB, 33ABA;
9. Deduction from family pension under clause (iia) of section 57;
10. Any deduction under chapter VIA (like section 80C, 80CCC, 80CCD, 80D, 80DD, 80DDB, 80E, 80EE, 80EEA, 80EEB, 80G, 80GG, 80GGA, 80GGC, 80IA, 80-IAB, 80-IAC, 80-IB, 80-IBA, etc). However, the deduction under sub-section (2) of section 80CCD (employer contribution on account of the employee in notified pension scheme) and section 80JJAA (for new employment) can be claimed.
11. Tax benefit on interest paid on housing loan up to Rs. 2 lakh. This comes under section 24.
12. Tax rebate of Rs. 12,500 or full tax rebate (whichever is lower) on a net taxable income up to Rs. 5 lakhs. This comes under section 87A.
List of Exemptions still available
Here are some deductions and exemptions you can still avail in the new tax regime.
1. Death-cum-retirement benefit
2. Commutations of pensions
3. Leave encashment on retirement
4. VRS benefits
5. Employee Provident Fund (Employer contribution)
6. Short-term withdrawals and maturity benefits from NPS
7. Scholarship for education
8. Income from life insurance
9. Agricultural income
10. The deduction under sub-section (2) of section 80CCD (employer contribution on account of the employee in notified pension scheme) and section 80JJAA (for new employment) can be claimed.
What is the Financial Year (FY)?
The year in which you earn the income is known as the financial year. The financial year (FY) starts from April 1 and ends on March 31 of the following year.
What is an Assessment Year (AY)?
The assessment year is the year following the financial year in which the income is assessed. The assessment year (AY) starts from April 1 and ends on March 31, immediately succeeding a financial year (FY).
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Income Tax Slabs for FY 2020-21 (AY 2021-22)
