Income tax slabs and rate 2020 - 2021

The Ministry of Finance in India is responsible for announcing revised rates of Income-tax on the basis of a system determined by income tax slabs. Income tax is levied on earning members of a nation, including individuals, corporates, Hindu undivided families, etc., in proportion to their income. However, the rate of income tax imposed is not consistent across different ranges of income. The motive behind such a system is to project a sense of fairness by increasing the liability and the ability to pay, thereby promoting a culture of equity in Indian society.

The Meaning of an Income Slab and its Impact:

An income slab is the categorization of persons that earn an income within a particular range in the same bracket. The persons belonging to the same category are required to pay the same rate of tax on their income; in India, which increases in the income slab, the rate of income tax payable increases. This reflects a progressive system of income tax levied in the nation. As per the prevailing law in India, there are three categories of individual taxpayers. The first category is residents and non-resident Indians who are less than 60 years of age; second, Indian residents who are above sixty years of age but less than eighty years of age are known as senior citizens—lastly, super senior citizens who are over eighty years old of age Indian residents. The shift in the Indian tax regime provides taxpayers with an essential choice to switch over to the new regime or to continue paying on the basis of the old regime. 

Tax slabs for the Financial year 2020-21:

The revised tax slabs in India for 2020-21 are listed under the new regime. The rates as per the income tax slabs in India are as follows:

Alternatively, the income tax payable as per the old regime is as follows:

Income Tax Slabs in India Old vs. New:

The stark difference between the old tax regime and the new tax regime in India is that the taxpayer is mandated to forgo certain tax rebates, exemptions, and deductions under the new tax regime. These involve a long list of allowances and other deductibles such as relocation, house rent, children's education, professional tax, etc. However, certain essential deductible still remains, such as transport allowance for PWD, Investment in Notified Pension Scheme under section 80 CCD (2), etc. 

Therefore, the question may arise on what basis the taxpayers may decide to categorize themselves under the tax slabs in India's old vs. new regime. The following considerations paint a brief picture of the major points:

• If the taxpayer earns an income on a larger scale, the old regime may prove to be more lucrative for them, while persons who earn up to 15 lakhs annually may choose the new regime.


• The investment-related deductibles offered in both regimes are a strong point of consideration for taxpayers while deciding whether to switch to the new tax regime. For the person who mindfully invests in tax-saving schemes, changing over to the new regime might prove to be a liability. 


• Several taxpayers might have become comfortable with the old regime. The new regime might need them to rethink and restructure their financial plan altogether, making their adaptability a strong determinant behind their choice. 

In conclusion, taxpayers need to evaluate the perks and the cons of the new and the old tax regime in India and file their income tax accordingly.