Income Tax Explained – Tax slabs and How it is calculated.

Income Tax Explained – Tax slabs and How it is calculated.

July 23, 2019 6:00 pm,

Do you know what is Income tax and how is it calculated? Here is an article that explains about Income Tax, tax slabs and how it is calculated.

Income Tax Assessees:

Income Tax is a direct tax that every individual pay to the Government of India as per their earnings. There are different types of assessees of income tax. They are:

  • Resident Individuals and Non-Resident Indians
  • Hindu Undivided Families (HUFs)
  • Senior Citizens
  • Super Senior Citizens
  • Association of Persons, Bodies of individuals and other artificial judicial persons
  • Partnership Firms
  • Domestic Entity Companies
  • Foreign Entity Companies

Let us look at the tax slabs and calculations for Resident Individuals, HUFs, Senior Citizens and Super Senior Citizens categories.

Tax Slabs:

Income tax is collected in different slabs and not collected uniformly across all the types of assessees. The factors based on which the tax slabs are calculated are:

  • The income of the assessee
  • Residential status of the assessee
  • Assessment year
  • Rate of tax
  • Gross income
  • Maximum amount or threshold limit till where income is not chargeable

The following changes are made in the income tax slabs and rates for FY 2019-20

  • Tax rebate for the middle class – Individuals with a net taxable income of up to Rs. 5 lakhs are fully exempt from paying income tax.
  • Standard deduction – for the current year 2019-20, the government has maintained at Rs. 50 thousand.
  • Tax deduction at source (TDS) limit on rental income – The threshold on rental income is increased to Rs. 2.4 lakh. Also, the income tax exemption from notional rent for unsold properties is increased from 1 year to 2 years.
  • TDS threshold on interest income – The TDS for interest income is increased to Rs. 40 thousand annually.

Tax Slabs for different categories of individuals are given below:

Individuals below 60 years of age, HUFs, NRIs:

Income Slabs Tax Rate Surcharge Cess
Up to Rs. 2.5 lakh Nil Nil Nil
Rs. 2,50,001 to Rs. 5,00,000 5% of (total income minus 2,50,000) Nil Nil
Rs. 5,00,001 to Rs. 10,00,000 Rs. 12,500 + 20% of (total income minus 5,00,000) Nil 4%
Rs. 10,00,001 to Rs. 50,00,000 Rs. 1,12,500 + 30% of (total income minus 10,00,000) Nil 4%
Rs. 50,00,001 to Rs. 1 crore Rs. 1,12,500 + 30% of (total income minus 10,00,000) 10% 4%
More than Rs. 1 crore but less than Rs. 2 crores Rs. 1,12,500 + 30 % (total income minus 10,00,000) 15% 4%
More than Rs. 2 crores but less than Rs. 5 crores Rs. 1,12,500 + 30% (total income minus 10,00,000) 25% 4%
More than Rs. 5 crores Rs. 1,12,500 + 30% (total income minus 10,00,000) 37% 4%

For individuals below 60 years of age, HUFs, NRIs:

Note – The rebate of Rs 12,500 is available for those whose next taxable income does not exceed Rs. 5 lakhs, there by the tax liability is zero.

Senior Citizens:

Income Slabs Tax Rate Surcharge Cess
Up to Rs. 3 lakh Nil Nil Nil
Rs. 3,00,001 to Rs. 5,00,000 5% of (total income minus 3,00,000) Nil Nil
Rs. 5,00,001 to Rs. 10,00,000 Rs. 10,000 + 20% of (total income minus 5,00,000) Nil 4%
Rs. 10,00,001 to Rs.50,00,000 Rs. 1,10,000 + 30% of (total income minus 10,00,000) Nil 4%
Rs. 50,00,001 to Rs. 1 crore Rs. 1,00,000 + 30% of (total income minus 10,00,000) 10% 4%
More than Rs. 1 crore Rs. 1,00,000 + 30% of (total income minus 10,00,00) 15% 4%

Super Senior Citizens:

Citizens who are above 80 years of age in the financial year

Income Slabs Tax Rate Surcharge Cess
Up to Rs. 5 lakhs Nil Nil Nil
Rs. 5,00,001 to Rs. 10,00,000 Rs. 10,000 + 20% of (total income minus 5,00,000) Nil 4%
Rs. 10,00,001 and above Rs. 1,10,000 + 30% of (total income minus 10,00,000) Nil 4%

So, using the given tax slabs, the individuals need to calculate the income tax applicable and remit the same to the government before the deadline. Also, IT returns have to be filed by the income tax assessees before the due date, which is usually, July 31st of every year.

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