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New optional Income Tax Rates vs Existing Income Tax Rates AY 2020-21 onwards

As we have entered into a new financial year i.e. 2020-21, the responsibility of the taxpayers has increased because they must select the tax regime i.e. either new tax rates or the existing ones at the beginning of the year.

The taxpayers need to know all about income tax benefits available to Individuals and Hindu undivided family for AY 2021-2022 so that tax planning can be made accordingly. Here is the complete guide available for the individuals and Hindu undivided family.

Tax planning is something that has to be done well at the beginning of the financial year.

This article covers the Income-tax slabs available for the assessment year 2021-2022:

(A) Tax Slab for Individuals who is of the age of less than 60 years on the
last day of the relevant previous year, every HUF/AOP/BOI/ artificial juridical person.

Net IncomeRate of TaxSurcharge (if any)Higher and education cess
Upto Rs.2.5 lakhNILNil 
Rs.2.5 Lakh to Rs.5 Lakh5% Nil4%
Rs.5 Lakh to Rs.10 lakh20%Nil4%
Rs.10 Lakh to Rs.50 lakh 30% Nil4%
Rs.50 Lakh to Rs.1 Crore30%10% 4%
Above Rs.1 Crore30% 15% 4%

(B) Tax Slab for a “RESIDENT” Senior Citizen who is 60 years or more but less than 80 years at any time during the previous year.

Net IncomeRate of TaxSurcharge (if any)Higher and education cess
Upto Rs.3 lakhNILNil 
Rs.3 Lakh to Rs.5 lakh5%Nil4%
Rs. 5 Lakh to Rs. 10 Lakh20%Nil4%
Rs.10 Lakh to Rs.50 lakh30% Nil4%
Rs.50 Lakh to Rs.1 Crore30%10% of Income Tax4%
Above Rs.1 Crore/-30% 15% of income tax4%

(C) Tax Slab for a “RESIDENT” Very Senior Citizen who is 80 years or more at any time during the previous year.

Net IncomeRate of TaxSurcharge (if any)Higher and education cess
Upto Rs. 5 lakhNILNil 
Rs.5 Lakh to Rs.10 lakh20% Nil4%
Rs.10 Lakh to Rs.50 lakh30%Nil4%
Rs.50 Lakh to Rs.1 Crore30%10% 4%
Above Rs.1 Crore/-30%15%4%

Note: (a) Health and education cess at the rate of 4% up to the net income of Rs.50,00,000/- should be calculated on the amount of Income Tax as calculated.

(b) Health and education cess at the rate of 4% over and above the net income of Rs.50,00,000/- should be calculated on the amount of Income Tax and Surcharge as calculated.

For e.g., if the amount of income tax is Rs.1,00,000 and the Surcharge applicable is at the rate of 10% which comes out to Rs.10,000, then the cess should be calculated on Rs.1,10,000 at the rate of 4% i.e. Rs.4,400/-.

Section 115BAC – Concessional new tax regime/Tax rates introduced in Union Budget 2020

new income tax slabs

New Income Tax rates applicable for financial year 2020-21

new optional tax slab
Net IncomeTax Rates
Upto Rs.2.5 lakhNIL
Rs.2.5 Lakh to Rs.5 Lakh5%
Rs.5 Lakh to Rs.7.5 lakh10%
Rs.7.5 Lakh to Rs.10 lakh15%
Rs. 10 lakh to Rs. 12.5 Lakh20%
Rs. 12.5 Lakh to Rs. 15 Lakh25%
Above Rs. 15 Lakh30%

Note: Surcharge under the new income tax regime for Individual/ Hindu undivided family.

Net IncomeRate of Surcharge
Rs.50 Lakh to Rs.1 Crore10%
Rs. 1 Crore to Rs. 2 Crore15%
Rs. 2 Crore to Rs. 5 Crore25%
Rs. 5 Crore to Rs. 10 Crore37%
Above Rs. 15 Crore37%

The option to pay tax at concessional tax rates shall be available only if the  total income of the assessee is computed without claiming following  exemptions or deductions: 

individual or huf opting section 115BAC
section 115BAC
  • Leave Travel concession as per Section 10(5)
  • House Rent Allowance as per Section 10(13A)
  • Official and personal allowances (other than those as may be  prescribed) as per Section 10(14)
  • Allowances to MPs/MLAs as per Section 10(17)
  • Allowances for the income of minor as per Section 10(32) 
  • Deduction for units established in Special Economic Zones (SEZ)  as per Section 10AA
  • Standard Deduction as per Section 16(ia)
  • Entertainment Allowance as per Section 16((ii)
  • Professional Tax as per Section 16(iii)
  • Interest on housing loan as per Section 24(b)
  • Additional depreciation in respect of new plant and machinery  as per Section 32(1)(iia)
  • Deduction for investment in new plant and machinery in notified backward areas as per Section 32AD 
  • Deduction in respect of tea, coffee or rubber business [Section  33AB]; 
  • Deduction in respect of business consisting of prospecting or extraction or production of petroleum or natural gas in India as per Section 33ABA
  • Deduction for donation made to approved scientific research  association, university college or other institutes for doing  scientific research which may or may not be related to business as per Section 35(1)(ii)
  • Deduction for payment made to an Indian company for doing  scientific research which may or may not be related to business  as per Section 35(1)(iia)
  • Deduction for donation made to the university, college, or other  institution for doing research in social science or statistical  research as per Section 35(1)(iii)
  • Deduction for donation made for expenditure on scientific  research as per Section 35(2AA)
  • Deduction in respect of capital expenditure incurred in respect of certain specified businesses, i.e., cold chain facility, warehousing facility, etc. as per Section 35AD
  • Deduction for expenditure on agriculture extension project as per Section 35CCC 
  • Deduction for family Pension as per Section 57(iia) and 
  • Deduction in respect of certain incomes other than specified under Sections 80JJAA, 80CCD(2), and deduction under section  80LA for Unit located in IFSC as stated in Part C of Chapter VI-A.
concessional rate

Total income of the assessee is calculated after claiming depreciation under section 32, other than additional depreciation,  and without adjusting brought forward losses and depreciation from any of the earlier years (if such loss or depreciation pertains to any deduction under the aforesaid sections).

Further, loss under the head house property can’t be set off against other heads of Income.

conditions

Furthermore, such loss and depreciation will not be carried forward.
If the assessee has any unabsorbed depreciation, relating to additional depreciation, which has not been given full effect, the corresponding adjustment shall be made to WDV of the block of assets in the prescribed manner.

concessional rates conditions

In case the assessee has business income, this option shall be exercised on or before the due date for furnishing the return of income. Once the assessee has exercised the option for any previous year, it cannot be subsequently withdrawn for the same or any other previous year.

The option once exercised for any previous year can be withdrawn only once in the subsequent previous year (other than the year in which it was exercised) and thereafter, he shall never be eligible to exercise this option again except where such person ceases to have any business income. 

If the assessee does not have business income, the option must be exercised along with the return of income for every previous year.

If an assessee, after opting for Section 115BAC, claims any of prescribed deduction or allowance in any previous year,  then the option to pay tax at concessional rate shall become invalid for that year. 

The assessee opting for this scheme has been kept out of the purview of Alternate Minimum Tax (AMT). Further, the provision relating to the computation, carry forward, and set off of AMT  credit shall not apply to these assessees.

How to compute your Income Tax Liability for any relevant Assessment Year.

S.NoParticularsRemarks
1Tax Payable on total incomeCompute the amount of tax payable on Total Income as per the tax rates relevant for the Assessment Year.
2Rebate u/s 87AIf you are a resident individual, whose total income does not exceed ₹5,00,000, you can claim a rebate of income-tax u/s 87A, of an amount equal to income-tax payable, or ₹12,500, whichever is less
3(1) – (2)Tax after rebate
4Add: SurchargeAdd surcharge if applicable
5(3)+ (4)Tax after surcharge (if any)
6Add: Health and Education Cess @4%Please compute health and education cess @4% of the tax after rebate. (i.e. 4% of S.No 5)
7(5) + (6) Total Tax & Cess   
8Less: Rebate U/s 86, 89, 90, 90A or 91In case of Sec 89(1): Please enter the amount of tax relief admissible u/s 89(1), computed as per Form 10E or as mentioned in Part B of Form 16, in respect of arrears or advances of salary received during the year
9Interest u/s 234ACompute the amount of interest payable for delay in filing return of income, if any, as per provisions of section 234A  
10Interest u/s 234B  Compute the amount of interest payable for short-payment of advance tax, if any, as per provisions of section 234B.  
11Interest u/s 234C  Compute the amount of interest payable for deferred payment of advance tax as per provisions of section 234C.  
12Fee u/s 234F  Enter the amount of fees payable for delay in filing return of income as per section 234F.   Fee for default in furnishing return of income Where person required to furnish ROI U/s 139(1), fails to do so 5,000/-, if ROI furnished on or before 31st December of the Assessment Year10,000/- in any other case.   Provided, if TI does not exceed Rs. 5Lakh, Max – Rs.1000/-.
13Total of Tax, Fees and Interest payable 

Want to know more about relief and rebates available under the Income Tax Act.

[deduction from salary – u/s 169(ia), u/s 16(ii) and u/s 16(iii), Rebate u/s 86, Rebate u/s 87A and Relief u/s 89]. Click here.

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CA Devesh Thakur

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