All individuals and entities within the borders of India are required to pay a certain amount as tax to the government. However, the amount of tax paid by each individual or an organization depends on the income tax slab he or she falls into which is decided by the Government of India. The tax slabs are also revised and amended from time to time after careful consideration by the Government of India during the annual budget session.
New Income Tax Slab
In budget 2020, several significant changes were introduced in the income tax regime. Taxpayers have been given the option of filing income tax returns according to the new income tax regime or following the old one.
The New income tax slab for the financial year 2020 - 21 has provisions for both entities as well as individuals, Hindu undivided family, a body of individual/association of person.
One can go through the complete guide about income tax slabs in India given below -
• Individuals with income up to Rs.2.5 lakh are not required to pay any tax.
• Individuals with income between Rs.2.5 lakh and Rs.5 lakh must pay income tax at a rate of 5%.
• Those earning between Rs. 5 lakh to Rs. 7.5 lakh are required to pay tax at 10% and Rs.12,500.
• Those individuals whose earning falls within the slab of Rs.7.5 lakh to Rs.10 lakh will pay 15% income tax, along with Rs.37,500.
• Those whose annual income is in between Rs.10 lakh to Rs.12.5 lakh should pay income tax at a rate of 20%, and Rs.75,000.
• For individuals earning between Rs.12.5 lakh to Rs.15 lakh, the income tax rate of 25% is applicable. They will also be liable to pay Rs.1,25,000.
• Individuals with income over Rs.15 lakh need to pay income tax at a rate of 30% and Rs.1,87,500 in a financial year.
The income tax slab for entities has been mentioned below –
• Partnership firms and limited liability partnerships must pay income tax at a fixed rate of 30%. If the annual income of this type of firm exceeds Rs.1 crore, then they have to pay a surcharge of 12%. For local authorities, the tax and surcharge rate will be the same as partnership firms.
• Under this updated tax regime, foreign companies will pay income tax at 40%. In the case of total earning in between Rs.1 crore and Rs.10 crore, the organisation will have to pay a 2% surcharge. For taxable income over Rs.10 crore, they need to pay a surcharge of 5%.
• Cooperative societies earning up to Rs.10,000 shall pay income tax at 10% of taxable income. If the income is between Rs.10,000 to Rs.20,000; then they should pay 20% of their taxable income. If the income is over Rs.20,000; then the society should pay Income Tax at 30%. Additionally, if total income exceeds Rs.1 crore, then a surcharge of 12% will be applicable.
• Domestic companies opting for Section 115BA shall pay tax at 25%. A company that has opted for Section 115BAA shall pay income tax at 22%, whereas a domestic firm under Section 115BAB shall pay tax at 15%. Furthermore, an organization that has opted to pay income tax under Section 115BAA and 115BAB will have to pay a surcharge of 10%, which is irrespective of the total income amount.
Additionally, both individuals and entities will be paying a health and education cess of 4% irrespective of income tax slab. One should also note that resident individual whose annual income does not exceed Rs.5 lakh can continue to avail a Rebate of Rs.12,500 or 100 percent of income tax as per Section 87A of the Income Tax Act under both new and old tax regime.
Those who will opt to pay tax according to new income tax slab cannot claim several tax deductions under Sections like 80TTA, 80TTB, 80DD, DDB. These include medical insurance premium, provident fund contribution, life insurance premium etc. However, in budget 2020, tax benefits under Section 80EEA have been extended for the next financial year. Hence, Individuals can claim deductions for up to Rs.3.5 lakhs on interest paid on the home loans which is applicable for affordable housing schemes only. Individuals who have applied for a home loan with another individual should also know the tax benefits on a joint home loan.
These benefits will encourage more individuals to opt for property. Furthermore, lending institutions also providing pre-approved offers to applicants for a quick and hassle-free application procedure, which is likely to increase the demand for such credit. These offers can be availed on other secured financial products too. One can quickly check their pre-approved offers on home loan by entering their name and contact information.
However, other than knowing what the tax savings and other advantages offered by home loans today are, borrowers, can also use an income tax calculator to check the amount they can save as tax exemptions.