If your income level rises, income will be taxed at various rates, called slab rates, at different levels or in different categories. In order to know how much of your tax liability will be in FY 2019-20, it’s important to know what income tax slab you fall into.
While doing your FY2019-20 tax planning, it’s important to know which tax slab your income falls into. The slab rate of your income will fall at is the rate your last income rupee will be taxed at.
These are the current income tax slabs:
Income tax slabs available to citizens below 60 years of age for the 2019-20 financial year. The surcharge derives from earnings above Rs 50 lakh. Cessation of health and education will be added to the income tax payable in all cases at a rate of 4 percent. The Rs 12,500 rebate is eligible under section 87A for persons with a net taxable income of up to Rs 5 lakh.
Suppose your total gross revenue in Financial Year 2019-20 is Rs 15 lakh. The first Rs 2.5 lakh from your Rs 15 lakh income will be exempted from tax from the income tax slab rates given above. This is because there is no income tax up to Rs 2.5 lakh as shown in point (a) according to the existing income tax rates.
After this, the money left in your hands (Rs 15 lakh-Rs 2.5 lakh) is Rs 12.5 lakh which is still taxable. The next Rs 2.5 lakh (i.e., Rs 5 lakh minus the tax-exempt Rs 2.5 lakh) will be taxed at 5 percent from point (b). So your income tax liability at this point would be Rs 12, 500 (5 percent of Rs 2.5 lakh).
Calculation of income tax for gross total income of Rs 15 lakh
The taxable income is Rs 10 lakh (Rs 12.5 lakh minus Rs 2.5 lakh which is taxed at 5 percent). From point (c), the next Rs 5 lakh (i.e. Rs 10 lakh minus Rs 5 lakh) of your profits will be taxed at a rate of 20 percent out of Rs 10 lakh. The tax liability is Rs 1 lakh here (20 percent of Rs 5 lakh).
Your total tax liability will then become Rs 1,12,500 (Rs 1 lakh plus Rs 12, 500). Remember, still the last rupee you do need to tax your income. Thus, from the gross total income of Rs 15 lakh, income up to Rs 10 lakh is only offered for tax purposes, until the point (c). Rs 5 lakh (Rs 15 lakh minus Rs 10 lakh) is the income left to be taxable now.
This Rs 5 lakh income will be taxed at 30 percent from point (d). In this case, the income tax liability would be Rs 1.5 lakh (30 percent of Rs 5 lakh). Your highest income slab is then taxed at 30 percent. The income tax slab under which the last rupee of your income is is taxed usually called the income tax slab you fall into.
Infact, any income above Rs 10 lakh is taxed at 30%. There will also be an income tax surcharge imposed at various income rates if the income is greater than Rs 50 lakh.
From above points(a), (b), (c) and (d), your total income tax liability is Rs 2,62,500. The cess will be applied to Rs 2,62,500 at a rate of 4 percent. The cess amount will be Rs 10,500 (4% of amount from Rs 2,62,500).
The total tax obligation you pay is Rs 2,73,000 (including the cess).
How to Lower the Tax Outgo
There are several tax exemptions and deductions available under the Income-Tax Act, 1961, which may help an individual taxpayer to lower his tax outgoing. These include house rent allowance (HRA) tax exemption, leave travel allowance, interest earned from the savings account from the post office etc. Similarly, under section 80C, individuals can claim maximum deduction of Rs 1.5 lakh by investing in specified tax-saving instruments.
Premium paid on health insurance can help you save tax under section 80D and deduction of up to Rs 10,000 can also be claimed under section 80TTA (by persons under the age of 60) on interest earned on savings account kept with bank and/or post office.
Latest Updates
- Major GST Updates Effective April 2025 Onwards: Key Changes in Compliance, Registration, and ReportingMajor GST Updates Effective April 2025 Onwards: Key Changes in Compliance, Registration, and Reporting As India continues to strengthen its indirect tax framework, several important changes under the Goods and Services Tax (GST) regime have been introduced, effective from April 1, 2025, and beyond. These reforms are aimed at enhancing ease […]
- Tax Implications of ESOPs and RSUs for EmployeesTax Implications of ESOPs and RSUs for Employees Employee Stock Option Plans (ESOPs) and Restricted Stock Units (RSUs) have become increasingly popular as part of employee compensation packages, especially in multinational corporations and startups. These instruments are not just used to reward performance but are key tools in retaining talent. However, […]
- ITR Filing Deadline Extended: New Last Date is September 15ITR Filing Deadline Extended: New Last Date is September 15 The deadline for filing income tax returns for FY 2024–25 (AY 2025–26) was moved from July 31 to September 15 by the Income Tax Department on Tuesday. “Considering the time needed for system readiness and the rollout of Income Tax Return (ITR) utilities […]
- ITR Portal Registration 2025: 8 Simple Steps to Register on the Income Tax e-Filing PortalITR Portal Registration 2025: 8 Simple Steps to Register on the Income Tax e-Filing Portal As the Income Tax Return (ITR) Filing Season 2025 draws near, it’s time for taxpayers—especially first-time filers—to get ready by registering on the official Income Tax e-Filing Portal. Designed as a Mission Mode Project under the National E-Governance […]
- Why Reconciling AIS and TIS is Crucial Before Filing ITRWhy Reconciling AIS and TIS is Crucial Before Filing ITR As Income Tax Return (ITR) season kicks off, many taxpayers are discovering two critical tools on the Income Tax portal — AIS (Annual Information Statement) and TIS (Taxpayer Information Summary). If you’re still relying only on Form 26AS to prepare your […]