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FAQs

All that you need to know...

FAQs

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Frequently Asked Questions

How is the tax calculated?

In India, calculation of the total tax liability, i.e. income tax payable is an essential activity for all taxpayers. Each year, the government presents the Annual Budget, which may introduce changes to the existing income tax structure. As taxpayer, subsequently, you must start with your financial planning for that financial year (also known as FY) and look into different tax-saving investments that can help you lower your grosss taxable income.

For the FY 2019-20, individual taxpayers whose total taxable income is up to Rs.5 lakh, are eligible to claim complete tax rebate under Section 87A. This implies that individuals whose income is less than Rs 5 lakhs, are not required to pay any income tax. Here is an insight into the existing income tax structure to help understand how to calculate your income tax liability

Minimum Threshold for Income Tax

The minimum income threshold for the FY 2019-20 depends on your age (as taxpayer). The existing limits of minimum threshold are as follows –

  • For individuals and Hindu Undivbide Family (HUf) – Rs.2.5 lakh
  • Individuals ageing between 60 to 79 years – Rs.3 lakh
  • Individuals ageing 80 years and above – Rs.5 lakh

Accordingly, if your total annual income falls below the minimum threshold, depending upon your age, you do not have to pay any income tax.

Tax Liability Beyond the Minimum Threshold

In case your income is more than the minimum threshold, the excess income is liable for income tax deduction as per the following rates –

For Individuals ageing less than 60 Years

Income Tax Slab (in Rs.) Applicable Tax Rates
Less than 2,50,000 Nil
2,50,001 and 5,00,000 5%
5,00,001 and 10,00,000 Rs. 12,500 + 20% of the total income over 5,00,000
Above 10,00,000 Rs. 1,12,500 + 30% of the total income over 10,00,000

For Individuals ageing between 60 to 80 Years (or Senior Citizens)

Income Tax Slab (in Rs.) Applicable Tax Rates
Less than 3,00,000 Nil
3,00,001 and 5,00,000 5%
5,00,001 and 10,00,000 Rs. 10,000 + 20% of the total income over 5,00,000
Above 10,00,000 Rs. 1,10,000 + 30% of the total income over 10,00,000

For Individuals ageing 80 Years or above (or Super Senior Citizens)

Income Tax Slab (in Rs.) Applicable Tax Rates
Less than 5,00,000 Nil
5,00,001 and 10,00,000 20%
Above 10,00,000 Rs. 1,00,000 + 30% of the total income over 10,00,000

In case, your total annual income is Rs 5 lakh or less, you are eligible to claim a full tax rebate under Section 87A.

Applicable Cess and Surchage

For all groups of taxpayers, there is a 4% Cess of tax applicable. Moreover, there is a Surcharge applicable as per the below mentioned rates –

Income (in Rs.) Applicable Surcharge
Between Rs.50 lakh and Rs.1 crore 10%
Between Rs.1 crore and Rs.2 crore 15%
Between Rs.2 crore and Rs.5 crore 25%
Above Rs.5 crore 37%

Please note that the slabs are applicable to the total annual income. The minimum tax exemption limit, however, will vary based on the age of the individual taxpayer.

Example of Income Tax Calculation -

Mayank is a 28-year old Data Analyst. His taxable income for the financial year 2019-20 is Rs. 8,50,000 (without TDS). Thus, his tax liability for the financial year will be –

Rs. 73,320*, in case Mayank does not have any tax saving investments (after deducting standard deduction & those under Section 80TTA)

* as per applicable tax slabs and cess

Calculation Details –

As per existing income tax slab, Mayank’s net taxable income (Rs. 8,50,000) will go up into the 20% tax slab.

His income tax calculation (without any tax saving investments), will be done as follows –

This is how you can calculate your income tax liability using the applicable tax slabs and deductions.

Total Taxable Income Rs. 8,50,000
(Deduct) Tax Saving Investments – Standard Deduction - Rs.(50,000)
Net Taxable Income Rs.7,90,000
Calculation of Tax Payable
20% (Rs.7,90,000 – Rs.500,000) Rs. 58,000
(Include) 5% (500,000 – 250,000) + 12,500
Total Income Tax Payable 70,500
(Include) Cess of 4% + 2820
Total Tax Payable for the financial year 2019-20 Rs. 73,320