The income tax slabs 2020-21 may be divided into the following major categories.
1. Individuals aged below 60 years and Hindu Undivided Family (HUF)
Individuals who have an yearly income lesser than INR 2.5 lakh are exempt from tax. In case the total income is in the range of INR 2.5 to 5 lakh, the applicable tax rate is 5%, which was earlier capped at 10%. Individuals earning anywhere between INR 5 to 10 lakh are liable to pay income tax at the rate of 20%, while those with an annual income above INR 10 lakh are required to pay tax at the rate of 30%.
Besides slashing the tax rate from 10% to 5% for those in the bracket of INR 2.5 to 5 lakh, Section 87A which offered INR 5,000 rebate to those earning up to INR 5 lakh is now reduced to INR 2,500 for those earning between INR 2.5 to 3 lakh. This indicates that the tax liability for those earning up to INR 3 lakh per annum would be zero, and those in the income bracket of INR 3-3.5 lakh would bear a tax burden of INR 2,500.
2. Senior citizens (individuals aged above 60 years)
The good news is that senior citizens may avail of lower tax rates. Retirees may enjoy tax exemption of up to INR 3 lakh. Besides, senior citizens may avail of a higher income slab of 5% tax rate, i.e. INR 3 to 5 lakhs, instead of INR 2.5-5 lakh for non-retirees.
3. Super senior citizens (individuals aged above 80 years)
Individuals above 80 years of age are considered super senior citizens according to the Income Tax Act, 1961. They enjoy a greater tax benefit, as their income up to INR 5 lakh is exempt from tax. This, therefore, reduces their tax liability to a great extent.
4. Applicable surcharge (in case income is more than INR 50 lakhs)
Individuals with an income between INR 50 lakh and one crore bear a surcharge of 10%. Those with income of more than INR 1 crore will face a surcharge rate of 15%.
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