New Income Tax Slab Rates after Union Budget 2020

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Every year after the presentation of Union Budget by the Finance Minister, everyone is interested to know about the income tax slab and tax rates for the forthcoming year so that one can calculate how much extra tax one has to pay or saved. 

The Union Budget announces the tax slab and tax rates ahead of the commencement of the next financial year. The Union Budget 2020 is presented on February 1, 2020. Various tax proposals were announced in the Budget 2020 and proposals are contained in the Finance Bill, 2020 to amend the Income Tax Act, 1961.


The Union Budget will be remembered for introducing the simplest form of new income tax slab and income tax rate for individuals and HUF taxpayers. For the first time, an optional method of the taxation system is introduced for individuals and HUFs. The existing income slab and rate of tax already in existence will remain in the statute. Besides, taxpayers were given an option to go for the new simplified and concessional income tax rate for AY 2020-21.

There are various tax rates provided in the income tax law which is based on the status of the taxpayer. The income tax slab and tax rates are defined for every 'person' under the Income Tax Act, 1961 (hereinafter referred to as "the Act"). The tax liability is calculated on the basis of the applicable tax rates for the relevant assessment year.

Under the income-tax law, tax rates are of two types-

(i) Tax rates on the basis of income-slab

(ii) A flat rate of tax on the income

Income tax slab basis - is progressive taxation and tax rates on this basis are defined for Individuals, HUF, Cooperative society, AoP, BoI, local authority, and AJP. In the income-slab basis, the tax rate increases as there is an increase in the level of income. Thus who earns more pays high tax as compared to those earning less. It gains importance due to the fact that in this case, a level of income is set on which no tax is charged which is called 'basic exemption limit'. 

A flat rate of tax- is levied on the income irrespective of the level of income. Every income earner pays the tax at the same rate and no discrimination is done in any case. Companies and firms are taxed on a flat rate basis.

In common parlance, the rates of tax applicable to Individual assessees or taxpayers are called 'Personal Income Tax' and the tax rate applicable to companies is called 'Corporate tax'.

The personal and corporate tax rates are contained in the Finance Acts and not in the Income Tax Act. Every year the Finance Minister along with the Union Budget presents the Finance Bill, which after the receipt of assent of the President of India, becomes a Finance Act.

A Finance Bill (or Act) contains two sets of tax rates- one is for the current year in which the Budget is presented and the other one is for the forthcoming year. 

As we know, every year the Union Budget is presented in the month of February. This year the Union Budget, 2020 was presented on 1st February 2020.

Thus, the Union Budget, 2020 was presented on 1st February 2020 and the Finance Bill, 2020 was introduced. 

The Finance Bill, 2020 will contain the tax rates for FY 2019-20 (current year) as well as the tax rates for FY 2020-21 (forthcoming FY). 

In the next Budget in February 2021, the tax rates provided for the forthcoming FY 2020-21 in the Finance Act, 2020 will become the tax rates for the current FY 2020-21 and will also contain the tax rates for forthcoming FY 2021-22. This is how the tax rates are prescribed in the law.

As stated above, the Finance Bill, 2020 provides two sets of tax rates-

One for the current FY 2019-20 (February 2020 falls in the FY 2019-20), and

Another one is for the forthcoming FY 2020-21.

It is pertinent to note that the Finance Bill, 2020 has not changed the income tax rates as applicable to all the assessees for the AY 2020-21. The same rate of income tax and income slab, as prescribed by the Finance (No. 2) Act, 2019 and the Taxation Laws (Amendment) Act, 2019, shall be continued in AY 2021-22. 

This is except for the new optional simplified income tax rate introduced for individuals and HUFs and a resident co-operative society.

Finance Bill, 2020 has introduced two new sections in the Income Tax Act, 1961 to provide for the optional simplified income tax rates for individual and HUF taxpayers and a resident co-operative society.

The new optional simplified income tax rates shall be applicable from the assessment year 2021-22 (FY 2020-21),

Applicable Income Tax Slab Rates for AY 2021-22 for Individuals/HUF/AoP/BoI/AJP:

Table-1
Category of Taxpayer
Individual/HUF/AoP/BoI/AJP
Residential Status
Resident and Non-Resident
Age of the Taxpayer
Under 60 years of age

Total Income
Income-Tax Rate
Up to Rs. 2,50,000
Nil
Rs. 2,50,001 to Rs. 5,00,000
5%
Rs. 5,00,001 to Rs. 10,00,000
20%
Above Rs. 10,00,000
30%

Table-2
Category of Taxpayer
Individual (Senior Citizen)
Residential Status
Resident
Age of the Taxpayer
Above 60 years of age

Total Income
Income-Tax Rate
Up to Rs. 3,00,000
Nil
Rs. 3,00,001 to Rs. 5,00,000
5%
Rs. 5,00,001 to Rs. 10,00,000
20%
Above Rs. 10,00,000
30%

Table-3
Category of Taxpayer
Individual (Super Senior Citizen)
Residential Status
Resident
Age of the Taxpayer
Above 80 years of age

Total Income
Income-Tax Rate
Up to Rs. 5,00,000
Nil
Rs. 5,00,001 to Rs. 10,00,000
20%
Above Rs. 10,00,000
30%

Remarks: A Non-Resident Senior Citizen or a Very Senior Citizen Individual is not entitled to additional relief on income-tax slab rates. Only a Resident Senior Citizen or a Very Senior Citizen Individual is entitled to additional relief on income-tax slab rates.

New optional simplified income tax rates for Individual and HUF only under section 115BAC

Table-A
Sl. No.
Total income
Rate of tax
1.
Upto Rs 2,50,000
Nil
2.
From Rs 2,50,001 to Rs 5,00,000
5 percent
3.
From Rs 5,00,001 to Rs 7,50,000
10 percent
4.
From Rs 7,50,001 to Rs 10,00,000
15 percent
5.
From Rs 10,00,001 to Rs 12,50,000
20 percent
6.
From Rs 12,50,001 to Rs 15,00,000
25 percent
7.
Above Rs 15,00,000
30 percent

 A comparative tax rate chart under both the old regime and the optional new regime is given for ready reference-

Sl. No.
Total income
Rate of tax
(Under Old Regime)
Rate of tax
(Under New Regime)
1.
Upto Rs 2,50,000
Nil
Nil
2.
From Rs 2,50,001 to Rs 5,00,000
5 percent
5 percent
3.
From Rs 5,00,001 to Rs 7,50,000
20 percent
10 percent
4.
From Rs 7,50,001 to Rs 10,00,000
15 percent
5.
From Rs 10,00,001 to Rs 12,50,000

30 percent

20 percent
6.
From Rs 12,50,001 to Rs 15,00,000
25 percent
7.
Above Rs 15,00,000
30 percent

The following rate of Surcharge, Marginal Relief,  Health & Education Cess and the Rebate u/s 87A shall be applicable to the old regime and the optional new regime.

Sl
Quantum of Total Income
Rate of Surcharge
(a)
Where the total income (including the income under the provisions of section 111A and section 112A ) exceeds Rs. 50 Lakh but does not exceed Rs. 1.0 Crore
10%
(b)
Where the total income (including the income under the provisions of section 111A and section 112A) exceeds Rs. 1.0 Crore but does not exceed Rs. 2.0 Crore
15 %
(c)
Where the total income (excluding the income under the provisions of section 111A and section 112A) exceeds Rs. 2.0 Crore but does not exceed Rs. 5.0 Crore
25 %
(d)
Where the total income (excluding the income under the provisions of section 111A and section 112A) exceeds Rs. 5.0 Crore
37%
(e)
Where the total income (including the income under the provisions of section 111A and section 112A) exceeds Rs. 2.0 Crore, but is not covered under clauses (c) and (d)
15%

An exceptional provision is provided where the total income includes any income chargeable under section 111A and section 112A of the Income-tax Act, the rate of surcharge on the amount of income-tax computed on that part of the income shall not exceed 15 percent.

[Rate of above-mentioned Surcharge as amended by the Taxation Laws (Amendment) Act, 2019]

Important:
Health & Education Cess on Income-tax and Surcharge for Individuals/ HUF/AoP/BoI/AJP:
In all cases covering   Table-1/2/3/A above
Health & Education Cess
4%
Important:
Note: Rebate u/s 87A is allowed on tax liability to a resident Individual if Total Income does not exceed Rs. 5,00,000. The maximum amount of rebate is Rs. 12,500. This rebate is not allowed to a non-resident and persons other than Individual.

Marginal Relief on Surcharge levied on Individuals/ HUF/ AoP/BoI/AJP
Where Total Income exceeds Rs. 50,00,000
Total amount payable as income-tax and surcharge on such income shall not exceed the total amount payable as income-tax on a total income of Rs. 50,00,000 by more than the amount of income that exceeds Rs. 50,00,000.
Where Total Income exceeds Rs. 1,00,00,000
Total amount payable as income-tax and surcharge on such income shall not exceed the total amount payable as income-tax and surcharge on a total income of Rs. 1 crore by more than the amount of income that exceeds Rs. 1 crore.
Where Total Income exceeds Rs. 2,00,00,000
Total amount payable as income-tax and surcharge on such income shall not exceed the total amount payable as income-tax on a total income of Rs. 2 crore by more than the amount of income that exceeds Rs. 2 crore.
Where Total Income exceeds Rs. 5,00,00,000
Total amount payable as income-tax and surcharge on such income shall not exceed the total amount payable as income-tax and surcharge on a total income of Rs. 5 crore by more than the amount of income that exceeds Rs. 5 crore.

Table-4
Category of Taxpayer
Co-operative Society
Residential Status
Resident

Total Income
Income-Tax Rate
Up to Rs. 10,000
10%
Rs. 10,001 to Rs. 20,000
20%
Above Rs. 20,000
30%
Important:
Surcharge on Income-tax for Co-operative Society:
Cases covering Table-4
Where Total Income exceeds Rs. 1,00,00,000
12%

Health & Education Cess on Income-tax and Surcharge for Co-operative Society:
Cases covering Table-4
Health & Education Cess
4%


Marginal Relief on Surcharge
Where Total Income exceeds Rs. 1,00,00,000
Total amount payable as income-tax and surcharge on such income shall not exceed the total amount payable as income-tax and surcharge on a total income of Rs. 1 crore by more than the amount of income that exceeds Rs. 1 crore.


New optional simplified income tax rates for a resident co-operative society only under section 115BAD

Table-B
Tax rate for resident co-operative society under section 115BAD
22%
Surcharge on a resident co-operative society if section 115BAD is opted
10%
Note: No marginal relief is applicable under this option.
Health & Education Cess
4%

Table-5
Category of Taxpayer
Partnership Firms and LLP
Residential Status
Resident

Particulars
Income-Tax Rate
Tax rate for Partnership firms & LLP
30%

Important:
Surcharge on Income-tax for Partnership Firms & LLP:
In all cases covering Table-5
Where Total Income exceeds Rs. 1,00,00,000
12%

Health & Education Cess on Income-tax and Surcharge for Partnership Firms & LLP:
In all cases covering   Table-5
Health & Education Cess
4%



Marginal Relief on Surcharge
Where Total Income exceeds Rs. 1,00,00,000
Total amount payable as income-tax and surcharge on such income shall not exceed the total amount payable as income-tax and surcharge on a total income of Rs. 1 crore by more than the amount of income that exceeds Rs. 1 crore.

Table-6
Category of Taxpayer
Local Authority
Residential Status
Resident

Total Income
Income-Tax Rate
Tax rate for Local Authority
30%
Important:
Surcharge on Income-tax for Local Authority:
Cases covering Table-6
Where Total Income exceeds Rs. 1,00,00,000
12%

Health & Education Cess on Income-tax and Surcharge for Local Authority:
Cases covering Table-6
Health & Education Cess
4%

Marginal Relief on Surcharge
Where Total Income exceeds Rs. 1,00,00,000
Total amount payable as income-tax and surcharge on such income shall not exceed the total amount payable as income-tax and surcharge on a total income of Rs. 1 crore by more than the amount of income that exceeds Rs. 1 crore.


Table-7
Category of Taxpayer
Domestic Company
Residential Status
Resident

Particulars
Income-Tax Rate
Total turnover or gross receipts during the previous year 2017-18 is up to Rs. 400 Crore
25%
Other domestic companies
30%
Domestic companies opting Sec. 115BA
25%

Minimum Alternative Tax on Book Profit (MAT)
15%

Table-8
Category of Taxpayer
Foreign Company
Residential Status
Non-Resident

Particulars
Income-Tax Rate
Tax rate for foreign companies
40%

Important:
Surcharge on Income-tax for Companies:
Domestic Company
Foreign Company
Total Income is up to Rs. 1 crore
Nil
Nil
Total Income is Rs. 1 crore to Rs. 10 crore
7%
2%
Total Income exceeds Rs. 10 crore
12%
5%

Health & Education Cess on Income-tax and Surcharge for Companies:
In all cases covering   Table-7 & 8 above
Health & Education Cess
4%

Marginal Relief on Surcharge
Where Total Income is Rs. 1 crore to Rs. 10 crore
Total amount payable as income-tax and surcharge on such income shall not exceed the total amount payable as income-tax and surcharge on a total income of Rs. 1 crore by more than the amount of income that exceeds Rs. 1 crore.
Where Total Income exceeds Rs. 10 crore
Total amount payable as income-tax and surcharge on such income shall not exceed the total amount payable as income-tax and surcharge on a total income of Rs. 10 crore by more than the amount of income that exceeds Rs. 10 crore.

Optional Corporate income-tax rates for Assessment Year 2021-22 [introduced by the Taxation Laws (Amendment) Act, 2019]

Table-C
Category of Taxpayer
Domestic Company
Domestic companies opting Sec. 115BAA
22%


Minimum Alternative Tax on Book Profit
Rate of MAT
MAT on Book Profit
0 % (Nil)


Surcharge on Income-tax for Companies:
Rate of Surcharge
Surcharge at a flat rate
10%


Health & Education Cess on Income-tax and Surcharge for Companies
In all cases covering   Table-2 above
Health & Education Cess
4%
Marginal Relief on Surcharge and MAT Credit u/s 115JAA
Not Available

Table-D
Category of Taxpayer
Domestic Company
Domestic companies opting Sec. 115BAB
Income from manufacturing activity
15%
Other Income (not specified in Chapter-XII)
22%
Excess Income from related parties
30%
STCG from non-depreciable assets
22%


Minimum Alternative Tax on Book Profit
Rate of MAT
MAT on Book Profit
0 % (Nil)


Surcharge on Income-tax for Companies:
Rate of Surcharge
Surcharge at a flat rate
10%


Health & Education Cess on Income-tax and Surcharge for Companies
In all cases covering   Table-2 above
Health & Education Cess
4%
Marginal Relief on Surcharge and MAT Credit u/s 115JAA
Not Available

Conclusion
It may be noted that the New Corporate Income Tax Rates mentioned in Table-C and Table-D are optional to a domestic company. If such a company does not opt for reduced New Corporate Income Tax Rates then it may continue to pay as per tax rates specified in Table-7.

Further, it may be noted that Surcharge on income-tax in Table-C and Table-D is applicable without any threshold limit of total income.

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