Income Tax and
Tax Rates In India [Updated 2020]
Topics Covered :-
Income Tax and
Tax Rates In India [Updated 2020]
Topics Covered :-
Taxes in India
The government of India makes a part of its revenue from taxes in two ways, direct and indirect.
- Direct Taxes – As you can guess from the name itself, it is the tax that one has to pay on his/her income directly to the government. Income Tax and Corporate Tax falls into this category.
- Indirect Taxes – It is the kind of tax that is priced on products and services used by the consumer. The tax is transferable from person to person but ultimately it the consumer who pays. The company then pays the collected tax to the government. GST (Goods and Services Tax) is one such indirect tax.
What is Income Tax?
In simple language, income tax is the tax charged by the government from the income of every taxable person, earned during a financial year. The taxability of the person is decided based on a monetary limit set by the government. However, this monetary limit keeps changing from time to time, considering factors like inflation and other economic events. Also, the income tax charged varies from person to person, thus the more you make, the more you pay.
Heads of Income
The income earned has been broadly categorised into five heads. Any income earned to be taxed must fall under any of these –
- Income from salary
This taxes the income earned as salary from a firm or organisation or as pension from banks. - Income from house property
This taxes the income earned as a rental from immovable property. - Income from business or profession
This taxes the income earned from a business or a professional set-up by him/her. Self-employed individuals, freelancers, contractors and businesses owners come under this head. - Income from capital gain
This taxes the income earned from the sale of investment in the form of shares, commodities, immovable property, etc. - Income from other sources
This taxes income earned from any source that does not comes under the above heads such as, lottery, gambling, bank interests, horse races, etc.
Taxpayers
The taxpayers are categorised as –
- Individuals
- HUFs (Hindu Undivided Family)
- AOPs (Association of Persons)
- BOIs (Body of Individuals)
- Firms
- Companies
Income Tax Rates
For non-individual assesses like companies, firms, LLPs, local authorities and co-operative societies, Income Tax is charged at a flat rate. As per Finance Act, 2020, following are the income tax rates incomes for FY 2020-21 (AY 2021-22):
*Special Tax*
In an attempt to reduce the tax burden on not-so-rich taxpayers of the country and to answer to the demands of a reduced tax rate, the government of India introduced sections 115 BAC and 115 BAD which apply to individuals / HUFs and resident co-operative societies respectively. With effect from Previous Year (PY) 2020-21 relevant to Assessment Year (AY) 2021-22 in the financial act of 2020. The newly inserted section 115 BAC provides the reduced tax rates, known as tax rates under new regime compared to the already persisting tax rates system, known as tax rates under the old regime.
LLP and Local Authority
| Particulars | Tax Rate |
| Income Tax | 30% |
| Surcharge when total income exceeds
INR 1 Crore |
12% |
| Health and Educational Cess | 4% |
Co-operative Society
| Particulars | Tax Rate |
| Up to INR 10,000 | 10% |
| Within INR 10,001 and 20,000 | 20% |
| Above INR 20,000 | 30% |
| Surcharge when total income exceeds
INR 1 Crore |
12% |
| Health and Educational Cess | 4% |
Special Tax –
| Particulars | Tax Rate |
| Any income | 22% |
| Surcharge | 10% |
| Health and Education Cess | 4% |
In the newly added section 115 BAD, co-operative societies can opt to pay tax at a lower tax rate only if the total income of co-operative society is computed without claiming specified exemptions, deductions or incentives. The option once exercised under this section cannot be subsequently withdrawn for the same or any other previous year.
Domestic Companies
Income tax rates for assessment year 2020-21 and 2021-22 are as follows,
| Particulars | 2020-21 Tax Rate | 2021-22 Tax Rate |
| Income Tax on total turnover / gross receipts during PY 2017-18 does not exceed INR 400 Crores | 25% | NA |
| Income Tax on total turnover / gross receipts during PY 2018-19 does not exceed INR 400 Crores | NA | 25% |
| Any other domestic company | 30% | 30% |
| Surcharge when total income exceeds INR 1 Crore but not exceeding INR 10 Crores | 7% | 7% |
| Surcharge when total income exceeds INR 10 Crores | 12% | 12% |
| Health and Education Cess | 4% | 4% |
Special Tax –
| Particulars | 2020-21 Tax Rate | 2021-22 Tax Rate |
| When it opted for Section 115BA | 25% | 25% |
| When it opted for Section 115BAA | 22% | 22% |
| When it opted for Section 115BAB | 15% | 15% |
| Surcharge* | 10% | 10% |
| Health and Educational Cess | 4% | 4% |
| MAT** | 15% | 15% |
| MAT on the company is a unit of an International Financial Services Centre and deriving its income solely in convertible foreign exchange | 9% | 9% |
* The rate of surcharge in case of a company opting for taxability under Section 115BAA or Section 115BAB
** The domestic company who has opted for special taxation regime under Section 115BAA and 115BAB is exempted from provision of MAT. However, no exemption is available in case where section 115BA has been opted.
Foreign Companies
| Particulars | Tax Rate |
| Income Tax on royalty received from Government or an Indian concern in pursuance of an agreement made with the Indian concern after March 31, 1961, but before April 1, 1976, or fees for rendering technical services in pursuance of an agreement made after February 29, 1964 but before April 1, 1976 and where such agreement has, in either case, been approved by the Central Government | 50% |
| Income Tax on any other income | 40% |
| Surcharge where total income is between INR 1 Crore and INR 10 Crores | 2% |
| Surcharge where total income exceeds INR 10 Crores | 5% |
| Health and Education Cess | 4% |
Special Tax Rate for Individuals and HUFs under New Regime
Income tax slabs under the new regime for all individuals for FY 2020-21 (AY 2021-22),
| Particulars | Tax Rate |
| Income up to INR 2.5 Lakhs | NIL |
| Income between INR 2.5 Lakhs and 5 Lakhs | 5% |
| Income between INR 5 Lakhs and 7.5 Lakhs | 10% |
| Income between INR 7.5 Lakhs and 10 Lakhs | 15% |
| Income between INR 10 Lakhs and 12.5 Lakhs | 20% |
| Income between INR 12.5 Lakhs and 15 Lakhs | 25% |
| Income exceeding INR 15 Lakhs | 30% |
| Surcharge when total income is between
INR 50 Lakhs and INR 1 Crore |
10% |
| Surcharge when total income is between
INR 1 Crore and INR 2 Crores |
15% |
| Surcharge when total income is between
INR 2 Crores and INR 5 Crores |
25% |
| Surcharge when total income is between
INR 5 Crores and INR 10 Crores |
37% |
| Surcharge when total income exceeds
INR 10 Crores |
37% |
| Health and Educational Cess | 4% |
Individuals opting to be taxed according to the new tax regime has to give up the following exemptions and deductions,
-
- Leave Travel Allowance (LTA)
- House Rent Allowance (HRA)
- Conveyance
- Daily expenses in the course of employment
- Relocation allowance
- Helper allowance
- Children education allowance
- Other special allowances [Section 10(14)]
- Standard deduction
- Professional tax
- Interest on housing loan (Section 24)
- Chapter VI-A deduction (80C,80D, 80E and so on) (Except Section 80CCD(2) and 80JJA)
Income Tax Rates under Old Regime for Individuals, NRIs, HUFs, AOPs and BOIs
For Individuals less than 60 Years Old (including HUFs, AOPs and BOIs).
| Particulars | 2020-21 Tax Rate | 2021-22 Tax Rate |
| Income up to INR 2.5 Lakhs | NIL | NIL |
| Income between INR 2.5 Lakhs and INR 5 Lakhs | 5% | 5% |
| Income between INR 5 Lakhs and INR 10 Lakhs | 20% | 20% |
| Income exceeding INR 10 Lakhs | 30% | 30% |
*Scroll down to the last table of this section for Surcharge and Cess.
For Senior Citizens who is 60 years or more at any time during the previous year.
| Particulars | 2020-21 Tax Rate | 2021-22 Tax Rate |
| Income up to INR 3 Lakhs | NIL | NIL |
| Income between INR 3 Lakhs and INR 5 Lakhs | 5% | 5% |
| Income between INR 5 Lakhs and INR 10 Lakhs | 20% | 20% |
| Income exceeding INR 10 Lakhs | 30% | 30% |
*Scroll down to the last table of this section for Surcharge and Cess.
Super Senior Citizen who is 80 years or more at any time during the previous year.
| Particulars | 2020-21 Tax Rate | 2021-22 Tax Rate |
| Income up to INR 5 Lakhs | NIL | NIL |
| Income between INR 5 Lakhs and INR 10 Lakhs | 20% | 20% |
| Income exceeding INR 10 Lakhs | 30% | 30% |
Surcharge and Cess
| Particulars | 2020-21 Tax Rate | 2021-22 Tax Rate |
| Income between INR 50 Lakhs and INR 1 Crores | 10% | 10% |
| Income between INR 1 Crores and INR 2 Crores | 15% | 15% |
| Income between INR 2 Lakhs and INR 5 Crores | 25% | 25% |
| Income between INR 5 Crores and INR 10 Crores | 37% | 37% |
| Income exceeding INR 10 Crores | 37% | 37% |
| Health and Educational Cess | 4% | 4% |
Note :
A resident individual (whose net income does not exceed Rs. 5,00,000) can avail rebate under section 87A. It is deductible from income-tax before calculating education cess. The amount of rebate is 100 per cent of income-tax or Rs. 12,500, whichever is less.
The enhanced surcharge of 25% & 37%, as the case may be, is not levied, from income chargeable to tax under sections 111A, 112A and 115AD. Hence, the maximum rate of surcharge on tax payable on such incomes shall be 15%.
This is same under both the tax regimes.
Taxes in India
The government of India makes a part of its revenue from taxes in two ways, direct and indirect.
- Direct Taxes – As you can guess from the name itself, it is the tax that one has to pay on his/her income directly to the government. Income Tax and Corporate Tax falls into this category.
- Indirect Taxes – It is the kind of tax that is priced on products and services used by the consumer. The tax is transferable from person to person but ultimately it the consumer who pays. The company then pays the collected tax to the government. GST (Goods and Services Tax) is one such indirect tax.
What is Income Tax?
In simple language, income tax is the tax charged by the government from the income of every taxable person, earned during a financial year. The taxability of the person is decided based on a monetary limit set by the government. However, this monetary limit keeps changing from time to time, considering factors like inflation and other economic events. Also, the income tax charged varies from person to person, thus the more you make, the more you pay.
Heads of Income
The income earned has been broadly categorised into five heads. Any income earned to be taxed must fall under any of these –
- Income from salary
This taxes the income earned as salary from a firm or organisation or as pension from banks. - Income from house property
This taxes the income earned as a rental from immovable property. - Income from business or profession
This taxes the income earned from a business or a professional set-up by him/her. Self-employed individuals, freelancers, contractors and businesses owners come under this head. - Income from capital gain
This taxes the income earned from the sale of investment in the form of shares, commodities, immovable property, etc. - Income from other sources
This taxes income earned from any source that does not comes under the above heads such as, lottery, gambling, bank interests, horse races, etc.
Taxpayers
The taxpayers are categorised as –
- Individuals
- HUFs (Hindu Undivided Family)
- AOPs (Association of Persons)
- BOIs (Body of Individuals)
- Firms
- Companies
Income Tax Rates
For non-individual assesses like companies, firms, LLPs, local authorities and co-operative societies, Income Tax is charged at a flat rate. As per Finance Act, 2020, following are the income tax rates incomes for FY 2020-21 (AY 2021-22):
*Special Tax*
In an attempt to reduce the tax burden on not-so-rich taxpayers of the country and to answer to the demands of a reduced tax rate, the government of India introduced sections 115 BAC and 115 BAD which apply to individuals / HUFs and resident co-operative societies respectively. With effect from Previous Year (PY) 2020-21 relevant to Assessment Year (AY) 2021-22 in the financial act of 2020. The newly inserted section 115 BAC provides the reduced tax rates, known as tax rates under new regime compared to the already persisting tax rates system, known as tax rates under the old regime.
LLP and Local Authority
| Particulars | Tax Rate |
| Income Tax | 30% |
| Surcharge when total income exceeds
INR 1 Crore |
12% |
| Health and Educational Cess | 4% |
Co-operative Society
| Particulars | Tax Rate |
| Up to INR 10,000 | 10% |
| Within INR 10,001 and 20,000 | 20% |
| Above INR 20,000 | 30% |
| Surcharge when total income exceeds
INR 1 Crore |
12% |
| Health and Educational Cess | 4% |
Special Tax –
| Particulars | Tax Rate |
| Any income | 22% |
| Surcharge | 10% |
| Health and Education Cess | 4% |
In the newly added section 115 BAD, co-operative societies can opt to pay tax at a lower tax rate only if the total income of co-operative society is computed without claiming specified exemptions, deductions or incentives. The option once exercised under this section cannot be subsequently withdrawn for the same or any other previous year.
Domestic Companies
Income tax rates for assessment year 2020-21 and 2021-22 are as follows,
| Particulars | 2020-21 Tax Rate | 2021-22 Tax Rate |
| Income Tax on total turnover / gross receipts during PY 2017-18 does not exceed INR 400 Crores | 25% | NA |
| Income Tax on total turnover / gross receipts during PY 2018-19 does not exceed INR 400 Crores | NA | 25% |
| Any other domestic company | 30% | 30% |
| Surcharge when total income exceeds INR 1 Crore but not exceeding INR 10 Crores | 7% | 7% |
| Surcharge when total income exceeds INR 10 Crores | 12% | 12% |
| Health and Education Cess | 4% | 4% |
Special Tax –
| Particulars | 2020-21 Tax Rate | 2021-22 Tax Rate |
| When it opted for Section 115BA | 25% | 25% |
| When it opted for Section 115BAA | 22% | 22% |
| When it opted for Section 115BAB | 15% | 15% |
| Surcharge* | 10% | 10% |
| Health and Educational Cess | 4% | 4% |
| MAT** | 15% | 15% |
| MAT on the company is a unit of an International Financial Services Centre and deriving its income solely in convertible foreign exchange | 9% | 9% |
* The rate of surcharge in case of a company opting for taxability under Section 115BAA or Section 115BAB
** The domestic company who has opted for special taxation regime under Section 115BAA and 115BAB is exempted from provision of MAT. However, no exemption is available in case where section 115BA has been opted.
Foreign Companies
| Particulars | Tax Rate |
| Income Tax on royalty received from Government or an Indian concern in pursuance of an agreement made with the Indian concern after March 31, 1961, but before April 1, 1976, or fees for rendering technical services in pursuance of an agreement made after February 29, 1964 but before April 1, 1976 and where such agreement has, in either case, been approved by the Central Government | 50% |
| Income Tax on any other income | 40% |
| Surcharge where total income is between INR 1 Crore and INR 10 Crores | 2% |
| Surcharge where total income exceeds INR 10 Crores | 5% |
| Health and Education Cess | 4% |
Special Tax Rate for Individuals and HUFs under New Regime
Income tax slabs under the new regime for all individuals for FY 2020-21 (AY 2021-22),
| Particulars | Tax Rate |
| Income up to INR 2.5 Lakhs | NIL |
| Income between INR 2.5 Lakhs and 5 Lakhs | 5% |
| Income between INR 5 Lakhs and 7.5 Lakhs | 10% |
| Income between INR 7.5 Lakhs and 10 Lakhs | 15% |
| Income between INR 10 Lakhs and 12.5 Lakhs | 20% |
| Income between INR 12.5 Lakhs and 15 Lakhs | 25% |
| Income exceeding INR 15 Lakhs | 30% |
| Surcharge when total income is between
INR 50 Lakhs and INR 1 Crore |
10% |
| Surcharge when total income is between
INR 1 Crore and INR 2 Crores |
15% |
| Surcharge when total income is between
INR 2 Crores and INR 5 Crores |
25% |
| Surcharge when total income is between
INR 5 Crores and INR 10 Crores |
37% |
| Surcharge when total income exceeds
INR 10 Crores |
37% |
| Health and Educational Cess | 4% |
Individuals opting to be taxed according to the new tax regime has to give up the following exemptions and deductions,
-
- Leave Travel Allowance (LTA)
- House Rent Allowance (HRA)
- Conveyance
- Daily expenses in the course of employment
- Relocation allowance
- Helper allowance
- Children education allowance
- Other special allowances [Section 10(14)]
- Standard deduction
- Professional tax
- Interest on housing loan (Section 24)
- Chapter VI-A deduction (80C,80D, 80E and so on) (Except Section 80CCD(2) and 80JJA)
Income Tax Rates under Old Regime for Individuals, NRIs, HUFs, AOPs and BOIs
For Individuals less than 60 Years Old (including HUFs, AOPs and BOIs).
| Particulars | 2020-21 Tax Rate | 2021-22 Tax Rate |
| Income up to INR 2.5 Lakhs | NIL | NIL |
| Income between INR 2.5 Lakhs and INR 5 Lakhs | 5% | 5% |
| Income between INR 5 Lakhs and INR 10 Lakhs | 20% | 20% |
| Income exceeding INR 10 Lakhs | 30% | 30% |
*Scroll down to the last table of this section for Surcharge and Cess.
For Senior Citizens who is 60 years or more at any time during the previous year.
| Particulars | 2020-21 Tax Rate | 2021-22 Tax Rate |
| Income up to INR 3 Lakhs | NIL | NIL |
| Income between INR 3 Lakhs and INR 5 Lakhs | 5% | 5% |
| Income between INR 5 Lakhs and INR 10 Lakhs | 20% | 20% |
| Income exceeding INR 10 Lakhs | 30% | 30% |
*Scroll down to the last table of this section for Surcharge and Cess.
Super Senior Citizen who is 80 years or more at any time during the previous year.
| Particulars | 2020-21 Tax Rate | 2021-22 Tax Rate |
| Income up to INR 5 Lakhs | NIL | NIL |
| Income between INR 5 Lakhs and INR 10 Lakhs | 20% | 20% |
| Income exceeding INR 10 Lakhs | 30% | 30% |
Surcharge and Cess
| Particulars | 2020-21 Tax Rate | 2021-22 Tax Rate |
| Income between INR 50 Lakhs and INR 1 Crores | 10% | 10% |
| Income between INR 1 Crores and INR 2 Crores | 15% | 15% |
| Income between INR 2 Lakhs and INR 5 Crores | 25% | 25% |
| Income between INR 5 Crores and INR 10 Crores | 37% | 37% |
| Income exceeding INR 10 Crores | 37% | 37% |
| Health and Educational Cess | 4% | 4% |
Note :
A resident individual (whose net income does not exceed Rs. 5,00,000) can avail rebate under section 87A. It is deductible from income-tax before calculating education cess. The amount of rebate is 100 per cent of income-tax or Rs. 12,500, whichever is less.
The enhanced surcharge of 25% & 37%, as the case may be, is not levied, from income chargeable to tax under sections 111A, 112A and 115AD. Hence, the maximum rate of surcharge on tax payable on such incomes shall be 15%.
This is same under both the tax regimes.
Still have some queries?
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Ask questions about Tax savings, Tax returns,
notices & compliances etc.
Still have some queries?
Talk to an expert…
Talk to an expert via call, whatsapp or messages.
Ask questions about Tax savings, Tax returns,
notices & compliances etc.
