What is new tax slab for the financial year 2020-21

What is Income Tax Slab?

Income tax on an individual or HUF is levied as per the slab system. In the slab system, the taxpayer is segregated according to his income.

As the income of the taxpayer increases, the rate of tax on the taxpayer also increases. In the slab system, higher tax is levied on high-income persons and less tax is levied on the low-income persons.

Which tax slab rate will be applicable on the individual, for this the individual is separated according to his age, such as –

• Less than 60 years
• Above 60 years but below 80 years (Senior Citizen)
• Above 80 Years (Super Senior Citizen)

However, the slab rate will not change according to age in the new slab rate, all age individuals will have the same tax rate in the new slab rate.

Which taxpayer will get the option to pay tax at the new or old slab rate?

• As per the Income Tax Act 1961, the slab rate is applicable only to Individuals or HUFs, whereas a fixed rate of tax is applicable to Companies, Firms, and Limited Liability Partnerships (LLPs).
• Therefore, only the individual or HUF will have to choose the option of paying tax at the new or old slab rate.

Can nonresidents also choose to pay tax in old and new tax slabs?

A non-resident person in India can also choose to pay tax at the new or old slab rate.

Before choosing the slab rate for the non-resident, the most important thing to keep in mind is that the non-resident did not get any age benefit even in the old slab rate.

For example, if there is also a non-resident senior citizen, then in this case only the slab rate of 2.5 lakhs will be applicable. That is, if the income of a non-resident in India is more than 2 lakh 50 thousand, then it will be mandatory for the taxpayers for income tax return filing.

Is there any difference between Salaried and Business Person in old and new tax slabs?

The taxpayer will have to choose between the new or old slab rate every year, but the rules for choosing between these two schemes are different for the salaried and business person.

 Selection of tax slab for the salaried person (in case of no income from business or profession) –

If an individual or HUF does not have income from a business or profession, then in this case the taxpayer has to select this option before the time limit specified in section 139(1) for filing the income tax return.

• If a taxpayer wants to opt for the option of paying tax in the new tax slab rate, he/she has to select section 115BAC in the income tax return. Unless you select it in the income tax return, the old slab rate will be applicable to you.
• In case of no business or professional income, the taxpayer has the option to choose between the old and new tax slabs every year.

In case of income from business or professional –

If the taxpayer has income from business or profession, then the taxpayer has to opt for the option of paying tax in the new tax slab before the time limit specified in section 139(1).

Once the taxpayer has opted for this option, then this option will always be applicable to him. That is, the taxpayer will not get the option to choose between old and new tax slabs every year.

What is the difference between the new and old tax slab rates?

The new slab rate will be applicable from the financial year 2020-21. If you choose to pay tax in this slab, you will be taxed at a lower rate, but you will not be given multiple deductions and exemptions for expenses.

However, if you pay tax at the old slab rate, you will have to pay a slightly higher rate of tax, but you will be able to avail all deductions and deductions for expenses.

However, if the taxpayer does not have income from business or profession later, then the taxpayer will get the option to choose from both the tax slabs again.

Old Slab Rate for the financial year 2020-21 (the assessment year 2021-22 )

• The tax rate for Up to 2.5 lakhs  is Nil
• The tax rate for tax slab 2.5 lakhs to 5 lakhs is 5%
• The tax rate for tax slab 5 lakhs to 10 lakhs is 20%
• The tax rate for More than 10 lakhs is 30%

For Individual/ HUF (Above 60 years but less than 80 years – Senior Citizen)

• The tax rate for Up to 3 lakhs is Nil
• The tax rate for the tax slab 3 lakhs to 5 lakhs is 5%
• The tax rate for the tax slab 5 lakhs to 10 lakhs is 20%
• The tax rate for More than 10 lakhs is 30%

For Individual/ HUF (Above 80 Years – Super Senior Citizen)

• The tax rate for Up to 5 lakhs is Nil
• The tax rate for the tax slab 5 lakhs to 10 lakhs is 20%
• The tax rate for More than 10 lakhs is 30%

Note – If the business person or professional chooses to pay tax in the new tax slab for one year, then he can pay tax in the old slab from the next year, but after coming back to the old slab, the taxpayer will be able to pay tax in the new tax slab at any time.

What is the new tax slab for the financial year 2020-21

New Slab Rate for the financial year 2020-21 (the assessment year 2021-22 )

• The tax rate for up to 2.5 lakh is nil
• Tax rate for the tax slab 2,50,000 to 5,00,000 is 5%
• Tax rate for the tax slab 5,00,000 to 7,50,000 is 10%
• tax rate for the tax slab 7,50,000 to 10,00,000 is 15%
• Tax rate for the tax slab 10,00,000 to 12,50,000 is 20%
• Tax rate for the tax slab 12,50,000 to 15,00,000 is 25%
• And the tax rate for Above 15,00,000 is 30%