Income Tax Slab

Income tax payment for individuals and corporate entities is a mandatory requirement as per the Income Tax Act, 1961 if their annual income is above the minimum exemption limit. However, taxpayers can also avail tax benefits under various sections of the Act. To reap these benefits, one must understand the income tax slab and applicable rates.

What is Income Tax Slab?

In India, where individuals earn an income within a diverse range, levying a tax on all individuals at a specific rate would not be a fair policy. The Act, therefore, segregates income ranges and levies tax at different rates as per the segregation. These groups are thus known as tax slabs.

The slabs also vary based on age if the taxpayer is an individual and as per the classification of entities. Income tax slabs are amended and revised each year during the Central Government’s Budget Session. These amendments and revisions once proposed are approved by the Parliament and implemented as law.

Income Tax Amendments in FY 2019-20

In the budget speech of Financial Year (FY) 2019-20, the Finance Minister announced certain revisions to the income tax rate structure. The new income tax slab will thus be in force for the Assessment Year (AY) 2020-21.

Here are a few highlights of the changes announced in the Budget Session 2019-20.

  • An annual income of up to Rs. 5 lakh for resident individuals will be exempt from tax.
  • For individuals with annual income between Rs. 2 Crore to Rs. 5 Crore, the surcharge has been increased to 25%. Surcharge has also been increased to 37% for individuals with an annual income above Rs. 5 Crore.
  • Annual turnover of up to Rs. 400 Crore brought under corporate income tax slab of 25%.
  • TDS at the rate of 2% chargeable for cash withdrawals above Rs. 1 Crore in a year.

Now, let’s take a look at the current income tax slab applicable for resident individuals in FY 2018-19 and 2019-20.

Income Tax Slabs for Resident Individuals

An individual resident’s basic exemption limit is decided based on his/her income, with division into three groups.

  • A resident individual within 60 years of age.
  • A resident individual between 60 and 80 years of age.
  • A resident individual above 80 years of age.

The taxability of these individuals as per the latest income tax slab is given in the following tables.

Income Tax Slabs for Individuals within 60 years of Age

Slabs for Taxable Income Applicable Tax Rates & Cess
Within Rs. 2.5 Lakh Nil
From Rs. 2.5 Lakh to 5 lakh Taxable income’s 5%

plus 4% cess on tax

From Rs. 5 Lakh to 10 Lakh 5% for taxable income between Rs. 2.5 Lakh and 5 Lakh

+ 20% on taxable income between Rs. 5 Lakh and 10 Lakh

plus 4% cess on tax

Above Rs. 10 Lakh 5% for taxable income between Rs. 2.5 Lakh and 5 Lakh

+ 20% on taxable income between Rs. 5 Lakh and 10 Lakh

+30% on taxable income above Rs. 10 Lakh

plus 4% cess on tax

Understand this taxation structure with the help of this example. Mr. X, aged 40 years, has an annual income of Rs. 7 Lakh. The tax calculation for him will thus be as follows.

Income tax on Rs. 2.5 Lakh @ Nil = Rs. 0

Income tax on Rs. 2.5 Lakh (Rs. 5 Lakh – Rs. 2.5 Lakh) @ 5% = Rs. 12,500

Income tax on Rs. 2 Lakh (Rs. 7 Lakh – Rs. 5 Lakh) @ 20% = Rs. 40,000

Total Income tax = Rs. 0 + Rs. 12,500 + Rs. 40,000 = Rs. 52,500

Plus cess @ 4% on Rs. 52,500 = Rs. 2,100

Total income Tax payable = Rs. 52,500 + Rs. 2,100 = Rs. 54,600

The Income Tax Act, 1961 also allows for deductions under sections 80(C) and 80(U) as applicable. In such cases, tax is calculated after taking into account such deductions, and cess added to arrive at the total tax payable.

Now, with this understanding of what is income tax slab and how tax is calculated on this basis, have a look at the tax applicability for resident individuals in other age brackets.

Income Tax Slabs for Individuals between 60 and 80 Years (Senior Citizens)

Slabs for Taxable Income Applicable Tax Rates & Cess
Within Rs. 3 Lakh Nil
From Rs. 3 Lakh to 5 lakh 5% on taxable income

plus 4% cess on tax

From Rs. 5 Lakh to 10 Lakh 5% on taxable income between Rs. 3 Lakh and Rs. 5 Lakh

+ 20% on taxable income between Rs. 5 Lakh and 10 Lakh

plus 4% cess on tax

Above Rs. 10 Lakh 5% for taxable income between Rs. 3 Lakh and Rs. 5 Lakh

+ 20% on taxable income between Rs. 5 Lakh and 10 Lakh

+30% on taxable income above Rs. 10 Lakh

plus 4% cess on tax

Income tax slabs for individuals above 80 years (Super senior citizens)

Slabs for Taxable Income Applicable Tax Rates & Cess
Within Rs. 5 Lakh Nil
From Rs. 5 Lakh to 10 Lakh 20% on taxable income between Rs. 5 Lakh and 10 Lakh

plus 4% cess on tax

Above Rs. 10 Lakh 20% on taxable income between Rs. 5 Lakh and 10 lakh

+30% on taxable income above Rs. 10 Lakh

plus 4% cess on tax

Also, resident individuals with annual income below Rs. 5 Lakh are eligible for a rebate of Rs. 12,500 under section 87(A) of the Income Tax Act, 1961. Additionally, a standard deduction of up to Rs. 50,000 is allowed for the FY 2019-20.

Note that these tax calculations are also applicable for Hindu Undivided Family (HUF).

Surcharges Applicable for Resident Individuals

For the FY 2019-20, new surcharge rates have also been introduced on the income of the rich. Check the table below to know how it applies.

Annual Income (Taxable) Applicable Surcharge Rates
Between Rs. 50 Lakh and Rs. 1 Crore 10%
From Rs. 1 Crore to 2 Crore 15%
From Rs. 2 Crore to 5 Crore 25%
Rs. 5 Crore and above 37%

Income Tax Slabs for Other Entities

Now, take a look at the income tax slab applicable to other entities.

  • Domestic Company

For a domestic company, tax applicability for a given FY depends on the gross annual turnover it earned in the previous year.

Gross Turnover Limit (For Previous Year) Income Tax Rate
Up to Rs. 2.5 Crore 25%
Above Rs. 2.5 Crore 30%

As per the announcement in the latest budget session, the introduction of income tax slab 2019 takes the new gross turnover limit of Rs. 400 Crore for the purpose. Also, surcharge at the rate of 7% is applicable if the income of a domestic company is between Rs. 1 Crore and Rs. 10 Crore. For income above Rs. 10 Crore, a surcharge of 10% is applicable.

A health and education cess of 4% is also levied on the tax calculated.

  • Partnership firm/LLP

For partnership firms and LLPs, there are no variable income tax slabs as the total income is taxable at the rate of 30%. Surcharge levied on firms falls under two categories mentioned below.

  • 7% of tax calculated if the total income is between Rs. 1 Crore and Rs. 10 Crore
  • 12% of tax calculated for total income above Rs. 10 Crore

Additionally, health and education cess at the rate of 4% is also levied on the total tax.

  • Co-operative Society

The income tax slab rates for a co-operative society are given in the following table.

Income slabs Applicable Rates
Income below Rs. 10,000 10% on income

Plus 4% cess on tax

Between Rs. 10,000 and 20,000 10% on Rs. 10,000

+20% on income between Rs. 10,000 and Rs. 20,000

Plus 4% cess on tax

Above Rs. 20,000 10% on Rs. 10,000

+20% on income between Rs. 10,000 and Rs. 20,000

+30% on income above Rs. 20,000

Plus 4% cess on tax

Also, a surcharge of 12% is applicable on income above Rs. 1 Crore.

  • Local authority

Income earned by a local authority is also taxable. However, there are no slab divisions and any income generated by a local authority is taxed at a flat rate of 30%.

Additionally, health and education cess is also levied at the rate of 4% on the tax calculated. A surcharge of 12% is also levied if the local authority’s annual income exceeds Rs. 1 Crore.

Income tax return filing is mandatory if the income falls under taxable slabs. So, make sure to keep a check on the due dates and file your income tax returns to avoid penalty.


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