income tax slab plays a crucial role in determining the tax liability of an individual. In every financial year, the government revises these slabs to accommodate economic changes and ensure fair taxation. Taxpayers must understand the various tax slabs and how they impact their overall tax payments.

Understanding Income Tax Slabs

An income tax slab refers to a range of incomes taxed at different rates. It is a progressive tax system where individuals with higher incomes pay higher taxes. The government categorizes taxpayers based on their annual income and levies taxes accordingly.

Types of Income Tax Slabs

Income tax slabs differ for different categories of taxpayers, such as:

1. Individuals below 60 years

2. Senior Citizens (60 to 80 years)

3. Super Senior Citizens (above 80 years)

4. Hindu Undivided Families (HUFs)

The tax slabs are different for each category, and the rates vary based on income levels.

Current Income Tax Slabs in India

The Indian government offers two taxation regimes: the old tax regime and the new tax regime. Taxpayers can choose between them based on the exemptions and deductions they wish to claim.

Old Tax Regime (With Deductions & Exemptions)

The old tax regime allows taxpayers to claim deductions under various sections like 80C, 80D, HRA, and more.

For individuals below 60 years:

• Up to ₹2,50,000: No tax

• ₹2,50,001 to ₹5,00,000: 5%

• ₹5,00,001 to ₹10,00,000: 20%

• Above ₹10,00,000: 30%

For senior citizens:

• Up to ₹3,00,000: No tax

• ₹3,00,001 to ₹5,00,000: 5%

• ₹5,00,001 to ₹10,00,000: 20%

• Above ₹10,00,000: 30%

For super senior citizens:

• Up to ₹5,00,000: No tax

• ₹5,00,001 to ₹10,00,000: 20%

• Above ₹10,00,000: 30%

New Tax Regime (Without Deductions & Exemptions)

• Up to ₹2,50,000: No tax

• ₹2,50,001 to ₹5,00,000: 5%

• ₹5,00,001 to ₹7,50,000: 10%

• ₹7,50,001 to ₹10,00,000: 15%

• ₹10,00,001 to ₹12,50,000: 20%

• ₹12,50,001 to ₹15,00,000: 25%

• Above ₹15,00,000: 30%

Choosing Between the Old and New Tax Regime

The choice between the two tax regimes depends on the taxpayer’s financial goals and eligibility for deductions. The old regime is beneficial for those who claim multiple deductions, while the new regime is suitable for individuals who prefer a simplified taxation process with lower tax rates.

How to Save Tax Legally

Taxpayers can utilize various legal means to reduce their taxable income:

• Invest in 80C instruments: Public Provident Fund (PPF), Employee Provident Fund (EPF), National Savings Certificate (NSC), and tax-saving fixed deposits.

• Health insurance premiums (80D): Deductions up to ₹25,000 (₹50,000 for senior citizens) for medical insurance.

• Home Loan Benefits: Deduction on interest payments (Section 24) and principal repayment (80C).

• National Pension System (NPS): Additional deduction under Section 80CCD(1B) up to ₹50,000.

• HRA Exemption: For salaried employees paying rent.

Conclusion

Understanding the income tax slab system is vital for every taxpayer to plan their taxes effectively. Choosing the right tax regime and utilizing deductions can significantly reduce the tax burden. Tax planning should be a crucial aspect of financial management to ensure compliance with regulations while optimizing savings.