Union Finance Minister Nirmala Sitharaman is all set to present the Union Budget 2021 at the parliament on February 1. It will be her third budget presentation and a crucial one, given the instability Indian economy has suffered in the last one year owing to the outbreak of the COVID-19 pandemic.
Ahead of the release of this year’s budget, here is all you need to know about the current income tax slabs in the country:
1. Sitharaman introduced new income tax slabs and tax rate for different sections of individual income up to Rs 15 lakh per annum, provided the taxpayer chooses to give up exemptions and deductions, in the budget of 2020 (https://www.news18.com/news/india/budget-2020-live-updates-income-tax-slab-rate-cut-nirmala-sitharaman-union-budget-speech-time-date-narendra-modi-2481871.html).
2. There are seven tax slabs in the country with different tax rates being prescribed to each group. In India, there are three categories of individual taxpayers now. These can be individuals who are below the age of 60 years, resident senior citizens who are 60 years and above but below 80 years of age, and resident super senior citizens who are above 80 years of age.
3. The new tax system says that the annual income up to Rs 2.5 lakh will be exempt from tax. The next slab is for individuals earning between Rs 2.5 lakh and Rs 5 lakh. They will have to pay 5 per cent tax. Next comes individuals who earn between Rs 5 and Rs 7.5 lakh, who will be taxed at 10 per cent. Similarly, those earning between Rs 7.5 and Rs 10 lakh will be taxed at 15 per cent rate.
4. Moving ahead, individuals earning between Rs 10 and Rs 12.5 lakh will have to pay tax at the rate of 20 per cent. Those between Rs 12.5 and Rs 15 lakh income will have to pay at the rate of 25 per cent and individuals earning above Rs 15 lakh will be taxed at 30 per cent.
5. One must remember that this new structure does not allow any exemptions like home loan, insurance, or standard deductions. Taxpayers are currently given the option to judge the pros and cons of the regimes to choose the one that suits them better.