Income Tax Act 1961
Income tax Act 1961, Every Person whose total income exceeds the maximum amount which is not chargeable to the income tax is an assesse, and shall be chargeable to the income tax at the rate or rates prescribed under the finance act for the relevant assessment year, shall be determined on basis of his residential status.
Income tax Act 1961 is the primary source of income to the country of India. If you are a resident of India and you earn income, you are required to pay income tax. The amount of income tax you pay will depend on your income, your residence status and your age.
Income tax is a tax payable, at the rate enacted by the Union Budget (Finance Act) for every Assessment Year, on the Total Income earned in the Previous Year by every Person.
Benefits of Income Tax Act 1961
- National Security and Infrastructure Development
- Providing Health Care Facilities
- Providing Education through Govt Schools
- Subsidy on Cooking Gas, Fertilizers and Other Essentials Commodities
- Salary and Pension to lakhs of Govt Employees.
What is Tax Regime (Old & New Regime)
The Govt of India has introduced new income tax regime in the year 2020 as an alternative to the old regime. Under this new regime tax payers are not eligible to claim exemptions or deductions, but the tax rates are lower compare to Old Regime. The New Tax Regime has six Tax slabs from 0% to 30%.
Which Tax Regime is better?
The Tax Regime will be best depend on the individuals based on the Income & investment. If you have invested or want more exemptions like HRA, PPF, LIC, School Education, Housing Loans, Educational Loan etc then you can opt Old Regime which may be better for you. If you have don’t have investment or exemptions then the you can opt New Regime which may be better for you.
To choose the right tax regime, you need to consider your individual circumstances. Here are a few things to keep in mind:
- Your income: If you have a high income, then the new regime may be better for you. This is because the new regime has lower tax rates for high-income earners.
- Your deductions and exemptions: If you have a lot of deductions and exemptions, then the old regime may be better for you. This is because the old regime allows you to claim these deductions and exemptions, which can reduce your taxable income.
- Your investment goals: If you are saving for retirement or other long-term goals, then you may want to consider the old regime. This is because the old regime allows you to claim deductions for certain investments, such as NPS and ELSS.
| Description | Old Tax Regime | New Tax Regime |
|---|---|---|
| Deductions and exemptions | Yes | No |
| Tax rates | Progressive | Flat |
| Number of tax slabs | 7 | 6 |
| Lowest tax rate | 5% | 5% |
| Highest tax rate | 30% | 30% |
Income Tax Slab up to 60 Years (Old Regime)
| Income Tax Slab | Tax Rate | Surcharge |
|---|---|---|
| Up to Rs. 2.5 lakh | Nil | Nil |
| Rs. 2.5 lakh to Rs. 5 lakh | 5% | Nil |
| Rs. 5 lakh to Rs. 7.5 lakh | 20% | Nil |
| Rs. 7.5 lakh to Rs. 10 lakh | 25% | Nil |
| Rs. 10 lakh to Rs. 15 lakh | 30% | Nil |
| Above Rs. 15 lakh | 30% | 10% for Income above 50 Lakhs 15% for Income above 1 Crores, 25% for Income above 2 Crores |
Income Tax Slab up to 60 Years (New Regime)
| Income Tax Slab | Tax Rate | Surcharge |
|---|---|---|
| Up to Rs. 3 Lakhs | Nil | Nil |
| Rs. 3 Lakhs to Rs. 6 Lakhs | 5% | Nil |
| Rs. 6 Lakhs to Rs. 9 Lakhs | 10% | Nil |
| Rs. 9 Lakhs to Rs. 12 Lakhs | 15% | Nil |
| Rs. 12 lakh to Rs. 15 Lakhs | 20% | Nil |
| Above Rs. 15 Lakhs | 30% | 10% for Income above 50 Lakhs 15% for Income above 1 Crores, 25% for Income above 2 Crores |
Income Tax Slab up to 60 Years (Old Regime vs New Regime)
| Income Slab (Rs.) | Tax Rate (% of Income) | Surcharge Rate (% of Income) | Old Regime | New Regime |
|---|---|---|---|---|
| Up to 2.5 Lakh | NIL | NIL | NIL | NIL |
| 2.5 Lakh to 3 Lakh | 5% | NIL | 5% | 5% |
| 3 Lakh to 6 Lakh | 10% | NIL | 10% | 10% |
| 6 Lakh to 9 Lakh | 15% | NIL | 15% | 15% |
| 9 Lakh to 12 Lakh | 20% | NIL | 20% | 20% |
| 12 Lakh to 15 Lakh | 25% | NIL | 25% | 25% |
| Above 15 Lakh | 30% | 10% for Income above 50 Lakhs 15% for Income above 1 Crores, 25% for Income above 2 Crores | 30% | 30% |
In Additional 4% of Health and education cess applicable on the tax amount.