Tax computation under the old scheme for resident individuals
As per the Income Tax Act, 1961, a taxpayer can be categorized as follows:-
- Individual
- Hindu Undivided Family (HUF)
- Association of Person (AOP)
- Body of Individuals (BOP)
- Artificial Juridical Person (AJP)
- Firms, LLPs and Local Authority
- Company
For each category of taxpayers, the income tax act has separate provisions.
Let us understand the taxation provisions for resident individual taxpayers.
An individual can either be a resident or he can be a non-resident. A resident individual is a person “who is in India in the previous year for 182 days or more” or “who has been in India for 365 days or more in four years immediately preceding the relevant previous year and 60 days or more in the previous year”.
For any individual who is either less than sixty years of age or he is a non-resident, then tax liability shall be computed using the following slab rates:-
Taxable Income is up to Rs. 2,50,000 : NIL
Taxable Income is more than Rs. 2,50,000 upto 5,00,000 : 5%
Taxable Income is more than Rs. 5,00,000 upto Rs. 10,00,000 : 20%
Taxable Income above Rs. 10,00,000 : 30%
For any resident individual (Senior Citizen) who is above 60 years but up to 80 years of age, then his tax liability shall be computed using the following slab rates:-
Taxable income is up to Rs. 3,00,000 : NIL
Taxable Income is more than Rs. 3,00,000 upto Rs. 5,00,000 : 5%
Taxable Income is more than Rs. 5,00,000 upto Rs. 10,00,000 : 20%
Taxable Income above Rs. 10,00,000 : 30%
For any resident individual (Super Senior Citizen) who is above 80 years of age, then his tax liability shall be computed using the following slab rates:-
Taxable income up to Rs. 5,00,000 : NIL
Taxable Income is more than Rs. 5,00,000 upto Rs. 10,00,000 : 20%
Taxable Income above Rs. 10,00,000 : 30%
For example,
If an individual has an income of INR 12,00,000, then such individual is liable to compute tax using the below mentioned approach:-
Up to 250000 : NIL
from 250000 to 500000 @2.5% : 12,500
from 500000 to 1000000@ 20% : 100,000
from 1,000,000 to 1,200,000@30% : 60,000
Thus, in the above case, the individual has to pay a tax of 172,500 (Plus 4% Cess)*.
Further, whenever the taxpayer computes his tax liability, he has to claim (set-off) the amount of advance tax or TDS paid or deducted respectively during the relevant previous year.
*In addition to the tax, the Assessee also has to pay the amount of Surcharge and Cess.
On any tax payable, a cess towards health and education is payable at the rate of 4%.
Also, surcharge is paid by the Assessee in addition to tax and Cess. Such percentage of surcharge varies with the amount of income.
For example, where the income is between 50 lakh to 1 Crores, the Assessee has to pay surcharge of 10% of the income tax. Where the income exceeds 1 crore but does not exceed 2 crores, surcharge is paid @ 15% of the income tax. Where the income exceeds 2 Crores but does not exceed 5 Crores, surcharge is paid @ 25% of the Income tax and where the income exceeds 5 Crores, surcharge is paid @37% of the income tax.
Apart from the above points, an individual is also entitled to a rebate of Rs. 12,500 or tax payable whichever is higher, if his total income does not exceed Rs. 5,00,000. Such rebate is provided under section 87A.
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