Taxes are one of the biggest sources of revenue for the government. It is with the help of taxes that the citizens pay, government can adequately spend on public infrastructure, defence, health programs, and launch other initiatives to benefit the masses. While there are many different types of taxes in India, the burden of income tax is the heaviest for taxpayers.

Income tax is a tax applicable to the salary you earn as well as the income you receive from other sources such as profits or gains from investments, income from house property, etc. If you have recently started working, it is very common for you to wonder how much tax do I have to pay each year. To know this, you first need to understand the income tax slabs.

What are the Different Income Tax Slabs in India?

The income tax you are required to pay to the government depends on the income tax slab you fall under. There are multiple slabs divided based on the income a taxpayer earns. Moreover, the slabs also vary based on three different age brackets-
  • Individuals below 60 years
  • Seniors between 60 to 80 years
  • Super seniors above 80 years

1. Tax Rates for Individuals Below 60 Years


Tax Slabs Tax Rates
An annual income of up to Rs. 2,50,000 Nil Taxes
Annual income between Rs. 2,50,001 to 5,00,000 10% on the amount above Rs. 2,50,000
Annual income between Rs. 5,00,001 to Rs. 10,00,000 20% on the amount above Rs. 5,00,000
Annual income above Rs. 10,00,000 30% of the amount above Rs. 10,00,000

2. Tax Rates for Seniors Between 60 to 80 Years


Tax Slabs Tax Rates
An annual income of up to Rs. 3,00,000 Nil Taxes
Annual income between Rs. 3,00,001 to 5,00,000 10% on the amount above Rs. 3,00,000
Annual income between Rs. 5,00,001 to Rs. 10,00,000 20% on the amount above Rs. 5,00,000
Annual income above Rs. 10,00,000 30% of the amount above Rs. 10,00,000

3. Tax Rates for Super Seniors Above 80 Years


Tax Slabs Tax Rates
An annual income of up to Rs. 5,00,000 Nil Taxes
Annual income between Rs. 5,00,001 to Rs. 10,00,000 20% on the amount above Rs. 5,00,000
Annual income above Rs. 10,00,000 30% of the amount above Rs. 10,00,000


If the annual income of an individual is above Rs. 1 crore, a surcharge of 10% is applicable. Apart from the tax rates, the scheme of taxation in India levies Educational Cess at 2% and SHEC (Secondary and Higher Secondary Education Cess) at 1%. This cess is over and above the applicable tax rates.

What is the Taxation Period?

The income tax is charged on the income you earn between April 1st and March 31st of the following year. All your income between this period will be assessed for calculating your tax liabilities. The year when the income is earned is considered as the “previous year” and the year in which the taxes are paid is considered as the “assessment year”.

So, in the assessment year from April 1st 2019 to March 31st 2020, your income of the previous year from April 1st 2018 to March 31st 2019 will be calculated.

How does the Government collect the Income Tax?

There are three different ways in which the government collects the income tax-

1. Tax Deducted at Source (TDS)

TDS is a taxation system where the tax amount is already deducted from where the income originated. For instance, applicable TDS is deducted by the employer directly from the salary of the employees. The employer then pays the TDS to the government. You can know your TDS with the help of an income tax India calculator.

2. Tax Collected at Source (TCS)

TCS is a type of tax paid by a buyer to the seller for purchasing certain types of goods. The seller then pays the TCS to the government. The goods covered under TCS are mentioned under Section 206C of the IT Act. Some goods where TCS is applicable are-

  • Alcoholic liquor
  • Tendu leaves
  • Timber obtained under a forest lease
  • Forest Produce
  • Scrap
  • Minerals such as iron ore, coal, and lignite

3. Advance Tax and Self-Assessment Tax

Every taxpayer is required to pay the entire tax liability of the financial year by March 31st of every year. However, you can also self-assess your tax liabilities before the 31st March deadline and pay Advance Tax. However, this facility is not available for salaried employees who do not have any other source of income as TDS is already deducted from their salary.

If you do have any income which is not subject to TDS, you can consider using an income tax India calculator to calculate your tax liabilities. Similarly, Self-Assessment tax is the balance tax which is paid by an assessed on his/her assessed income once Advance Tax and TDS are considered while filing tax returns.

Income Tax Deductions

There are also several deductions available for taxpayers with the help of which they can reduce their income tax liability. Some of the most popular options are-

  • Section 80C
  • As per the IT Act (Section 80C), you can claim tax deductions of up to Rs. 1,50,000 in a financial year by investing in ELSS (Equity-Linked Savings Schemes), 5-year FDs (Fixed Deposits), PPF (Public Provident Fund), repayment of the principal part of home loan, EPF (Employees Provident Fund), ULIPs (Unit-Linked Insurance Plans), and a few other options.

  • Section 80CCC and 80CCD
  • Under Section 80CCC, you can claim tax exemption in India on the premiums that you pay for an annuity plan of any life insurance company. However, the combined maximum deduction limit of Section 80C and 80CCC is only Rs. 1.5 lakhs. Under Section 80CCD, your contributions to NPS (National Pension Scheme) are eligible for an additional tax deduction of up to Rs. 50,000 in a year.

  • Section 80CCG
  • If you have invested your money in shares or mutual funds listed under Rajiv Gandhi Equity Saving Scheme (RGESS) for the first time, you are eligible for tax deductions under Section 80CCG. If you have invested in equity shares, you can claim a maximum deduction of up to 50% of the invested amount or you can claim a deduction of up to Rs. 25,000 for three assessment years.

  • Section 80D
  • If you have purchased a health insurance policy for yourself or your family, you can claim a tax deduction under Section 80D. So, how much tax is deducted under this section? You can claim deductions of up to Rs. 50,000 in a year on the premiums you pay for the same. If you have senior parents above the age of 60 years, you can purchase health insurance for them as well and get an additional tax deduction of up to Rs. 25,000.

  • Section 80TTA
  • Individual taxpayers can also claim a tax deduction of up to Rs. 10,000 on the interest they earn from their savings bank account. This deduction is also available if you have a savings account at a co-operative society or even post office.

  • Section 80E
  • If you have taken an education loan for higher studies for yourself, your spouse, your child, or even for a student to whom you are a legal guardian, you can claim a tax deduction on the interest part of the loan. This deduction is available for up to 8 years or until the time the interest component of the loan is completely paid, whichever is sooner.

  • Section 80EE
  • If you have a single house property and purchased it through a home loan, you can claim a deduction of up to Rs. 50,000 on the interest part of the loan under Section 80EE. However, the total value of the property should not be more than Rs. 50 lakh and the loan amount should not be more than Rs. 35 lakhs.

    Once you know how much tax to pay, you can deduct the interest part of the loan up to the limit to know your tax savings. Moreover, the home loan interest is also eligible for a deduction of up to Rs. 2 lakhs under Section 24 of the IT Act.

Some Other Important Deductions

Apart from the ones listed above, there are other deduction options like-
  • Section 80GG- Deduction on house rent
  • Section 80DD- Disabled dependent
  • Section 80DDB- Medical expenses incurred in the treatment of specified medical conditions
  • Section 80U- Physical disability
  • Section 80G- Donations

  • Smart Tax Planning to Reduce Income Tax Burden

    As you now know the income tax slabs as well as the deduction and tax exemption in India, you should use the available tax deductions to the fullest to save as much tax as possible. While things might look very confusing initially, spend some time learning more about the available deductions regularly to be able to use them effectively as soon as possible.

    In case of any queries, you can also hire a CA or a professional tax planner. There are now many different types of online and offline tax planning solutions available. Also, watch out for the changes in the income tax policies so that you always stay updated .

    To understand the tax benefits of taking a home loan, education loan, purchasing insurance, or making tax-saving investment, you can also consider getting in touch with a top financial institution. Discuss your requirements with one such reputed institution to get answers to all your queries and take the best advantage of the available deductions.

    Click here to visit our personalized online advisor that gives you the financial expertise you need.

    DISCLAIMER

    The information contained herein is generic in nature and is meant for educational purposes only. Nothing here is to be construed as an investment or financial or taxation advice nor to be considered as an invitation or solicitation or advertisement for any financial product. Readers are advised to exercise discretion and should seek independent professional advice prior to making any investment decision in relation to any financial product. Aditya Birla Capital Group is not liable for any decision arising out of the use of this information.



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