Income Tax Slab Rates for FY 2021-22 / AY 2022-23 | Budget 2021 Key Highlights

The Indian Finance Minister has tabled today, the Union General Budget 2021-22 in the Parliament. Kindly note that there has been no changes made to personal Income tax structure.

Below are the latest Income Tax Slab Rates for FY 2021-22 or AY 2022-23.(FY is Financial Year and AY is Assessment Year)

Latest Income Tax Slab Rates for FY 2021-22 / AY 2022-23

Effective from FY 2020-21, the individual tax assessee have an option to go for new Tax Slab Rates by forgoing the existing Income Tax Deductions and Exemptions, like HRA, Section 80C, Home loan tax benefits etc.,

So, to avail the below new tax regime, which is optional, taxpayers will have to let go of income tax exemptions.

  • Income below Rs 2.5 lakh will continue to remain tax-exempt.
  • Income between Rs 2.5 to Rs 5 lakh will be taxed at 5% but will continue to getSection 87a rebate, hence no tax liability.
  • Under the new regime, taxpayers will pay 10%, 15%, 20% and 25% for incomes between Rs 5 to Rs 7.5 lakh, Rs 7.5 to Rs 10 lakh, Rs 10 to Rs 12.5 lakh and Rs 12.5 to Rs 15 lakh, respectively.

The same income tax slab (new) structure will be continued for FY 2021-22 as well.

Income Tax Slab Rates FY 2021-22 budget 2021-22 latest IT slabs for Assessment Year 2022-23
Income Tax Slab Rates FY 2021-22 (New Tax Regime structure) | Budget 2021

Individuals opting to pay tax under the new lower personal income tax regime will have to forgo almost all tax breaks that you have been claiming in the old tax structure.

So, all deductions under chapter VIA(like section 80C, 80CCC, 80CCD, 80D, 80DD, 80DDB, 80E, 80EE, 80EEA, 80EEB, 80G, 80GG, 80GGA, 80GGC, 80IA, 80-IAB, 80-IAC, 80-IB, 80-IBA, etc)will not be claimable by those opting for the new tax regime.

In case, you wish to claim your IT deductions and exemptions then your income will be subject to tax as per the existing(FY 2019-20)income tax slab rates(as below);

Income Tax Slab Rates FY 2021-22 budget 2021-22 if tax deductions exemptions are claimed
Income Tax Rates FY 2021-22 (if tax deductions / exemptions are to be claimed)

Budget 2021-22 & Personal Finance : Key Highlights

Below are the latest personal finance related proposals that have been made in Budget 2021-22 ;

  • Senior Citizens of age 75 years and above who have only Pension and Interest income from Banks/Post office need not file their Income Tax Returns. The banks will deduct the applicable taxes though. The conditions for exemption from filing ITR from 1st April, 2021 are:
    • The senior citizen should be a resident and should be 75 years of age or more during the financial year for which tax has to be paid
    • She must receive a pension and interest income from the same bank.
    • Only certain specified banks are allowed for this purpose.
    • A declaration should be given to the bank in this regard.
  • TheRs 1.5 lakh Additional Income Tax deductionon affordable home loans will be extended for one more year, u/s 80EEA. The Interest deduction (Sec 80EEA) of Rs.1.5 lakhs to be extended for loans taken till 31st March, 2022. This deduction can not be claimed if you opt for new tax slabs.
  • The details of Capital Gains (Long term & Short Term), Dividend Income and Interest income will be pre-filled in the Income Tax Return Forms.
  • The Employee contributions (like EPF/Super annuation) not paid by employer will not be allowed as tax deduction to the Employers.
  • Income Tax Appellate Tribunal to become Faceless – Only electronic communication will be done.
  • The Income Tax Audit Limit to be increased to Rs.10 crores from Rs.5 crores for those having less than 5% cash transactions.
  • Advance tax liability on dividend income will arise only after declaration or payment of dividend by the Companies.
  • No TDS will be levied on dividend payouts by REITs & InvITs. But, such income is still a taxable income.
  • Alteration in double taxation rules and taxation for NRIs, especially who return to India. Certain rules and guidelines will be implemented in order to remove hardship of Double Taxation wrt NRI’s income.
  • For investor protection, Investor Charter as a right of all financial investors across all financial products to be introduced.
  • No more tax free interest on more than Rs 2.5 lakh a year contribution towards EPF/VPF (only employee contribution).
    • If employee contribution is more than Rs 2.5 lakh, the interest earned on the excess amount is taxable for contribution from 1st April 2021 onwards.
    • Example – If employee share EPF + VPF is Rs 4.5 lakh in FY 2021-22. The interest earned on excess Rs 2 lakh (Rs 4.5 L – Rs 2.5 L) will now be taxable.
    • Related Article : Interest on EPF Contributions above Rs 2.5 lakh is Taxable | Budget 2021
  • If ULIP yearly premium is more than Rs 2.5 lakh, the maturity is no more tax free.(New ULIPs purchased wef 01 Feb 2021. However, the death benefit is tax-free.)

Other Important Proposals:

  • A Voluntary vehicle scrapping policy has been announced. Vehicles to undergo fitness test – which is 20 years for passenger vehicles and 15 years for commercial vehicles.
  • Rs 35,000 crore to be allocated for further funds for COVID-19 vaccines. The govt will provide more for COVID-19 vaccines if required.
  • The LIC IPO will happen in FY 2021-22.

Continue reading :

  1. 15 Important Budget 2021 Proposals related to your Personal Finance | W.e.f AY 2022-23
  2. Income Tax Deductions List FY 2020-21 | New Vs Old Tax Regime AY 2021-22
  3. Top 15 Best Mutual Funds 2021 & beyond | Top Performing Equity Funds
  4. Rebate under Section 87A AY 2021-22 | Is Sec 87A Tax Rebate Available under New Tax Regime?
  5. Treatment of Standard Deduction Rs 50000 under the New Tax Regime (FY 2020-21 / AY 2021-22)

Kindly note that this article will be updated/edited as and when more information is available.

(Post first published on : 01-February-2021)

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