When it comes to tax planning and tax return filing, it is important to know which tax slab your income falls in. Note that the income tax slab rate in which your income will fall is the rate at which your income will be taxed. Note that your income increases, the tax rate will change as income at different levels or in different bands is taxed at different rates known as slab rates.
Current income tax slabs:
Here are the income tax slabs applicable to resident individuals below the age of 60 years for FY2019-20:
Note that surcharge is applicable from income above Rs 50 lakh. Health and Education cess at a rate of 4% is added to the income tax payable in all tax slabs. Standard rebate of Rs 12,500 is available for individuals having net taxable income of up to Rs 5 lakh under section 87A.
Calculation of income tax for gross total income of Rs 15 lakh:
If your gross total income is Rs 15 lakh, then your net taxable income will not necessarily be the same. The first Rs 2.5 lakh from your income of Rs 15 lakh will be exempted from tax because as per current income tax rates, there is no tax on income up to Rs 2.5 lakh. Post this rebate, your income left which is still chargeable to tax is Rs 12.5 lakh. the next Rs 2.5 lakh (i.e., Rs 5 lakh minus Rs 2.5 lakh which is tax-exempt) will be taxed at 5 per cent. Now, your income tax liability will be Rs 12,500 (5 per cent of Rs 2.5 lakh).
The income which is still chargeable to tax is Rs 10 lakh (Rs 12.5 lakh minus Rs 2.5 lakh which is taxed at 5%). Out of Rs 10 lakh, the next Rs 5 lakh of your income will be taxed at the rate of 20 per cent. The tax liability here comes out to be Rs 1 lakh.
At this point, your total tax liability will become Rs 1,12,500. Remember that your income needs to be taxed at the last rupee. Thus, out of the gross total income of Rs 15 lakh, income up to Rs 10 lakh is only offered to tax. The income which is now left chargeable to tax is Rs 5 lakh. This income of Rs 5 lakh will be taxed at 30 per cent. The income tax liability, in this case, will be Rs 1.5 lakh…Read more>>