There are multiple types of assessees which carry different tax rates under the Act. For a better understanding of these assessee' s you may refer Who is a person?
This article will help you to interpret the different rates of taxes charged to various assessees (tax payers) for the financial year* 2021-22. However, it is to be noted that similar tax rates will also be applicable for the financial year 2020-21 as well.
*Frequently used Income Tax terms to be uploaded soon
I am covering only Individual & HUF below while Part - II and Part III would follow!!
Additionally, surcharge is also charged along with the taxes as per the income earned. It is levied on Income tax of the assessees who fall into the high income bracket as depicted in the chart below. This is charged to shift the burden of tax from poor class to high end of the society. Below is the rate of surcharge based on the range of Income.
In addition to income taxes and surcharge, Health & Education Cess (HEC) is levied in order to support the health and educational needs of the rural families in India. Hence, this cess serves the purpose of healthy living and good educational background of the rural people. At present, HEC is charged @ 4% over and above the taxes (income tax + surcharge) on total income.
Though the department of Income Tax levies taxes, it also gives reliefs to the tax payers who earn less with the help of rebates. One such rebate is applicable by virtue of section 87A of the Act where, if a resident individual is having a Net Total Income up to Rs. 5 lakhs annually, then, the assessee would be entitled to a rebate of Rs. 12,500 or the amount of income tax, whichever is lower.
There is also a concept of marginal relief that will be covered in the future blogs.
The Finance Act 2020 had provided an option to the Individuals (including Non-residents) irrespective of the age & HUF's for payment of taxes at a reduced rates u/s 115BAC as given below only if the assessee does not claim the specified exemptions and/ or deductions.
It is to be noted that every year the assessee can make a choice to opt either of the type of tax slab. However, this option of choosing will not be available in case the assessee is having income from business or profession i.e. once the assessee opts to get taxed under section 115BAC, it will not be able to go back to get taxed under the normal income tax slabs. Surcharge & HEC shall be charged in both the cases.
So, this is how a resident individual/ HUF is taxed either as per the normal tax slabs or at concessional tax rates depending on the choice of the assessee.
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