The income tax slab is a table that shows the threshold limit beyond which a specific tax rate is applicable and various deductions are made as per the applicable rate. To better understand the working methodology of income tax slab, one has to first understand the vital elements based on which tax slabs are fixed.
- Income Tax Act, 1961– The provisions of income tax are contained in the Income Tax Act, 1961 which extends uniformly to the whole of India and has been effective since 1962. The act contains provisions for determining taxable income, tax liability, procedure for assessment of penalties, etc.
- Annual Amendments – Since the Income Tax Act is a revenue law, it requires amendments whenever the government wants to make changes in it. Under the annual amendment of existing revenue generation requirements, the Government proposes its finance bill, which directly decides the threshold limits for various tax rates which are commonly referred to as Income Tax.
- Income – Income in broad terminology is defined as any receipt in the form of money or money’s worth which occurs with a certain regularity or expected regularity from a definite source.
Key factors based on which income tax slabs are applicable include:
- Income of assessee
- Residential status of the assessee
- Assessment year
- Rate of tax
- Charge of income tax
- Maximum amount / threshold limit till income is not chargeable/taxable
- Gross income
The applicable Tax Rates for FY 2018-19 (Other than Capital Gain) are as under:
|Individuals/HUF||Resident Senior Citizens* (Between 60 to 79 years)||Resident Senior Citizens* (Age of 80 Years or more)|
|2,50,001 – 3,00,000||5%||Nil||Nil|
|3,00,001 – 5,00,000||5%||5%||Nil|
|5,00,001 – 10,00,000||20%||20%||20%|
|10,00,001 and above||30%||30%||30%|
- The above rates are exclusive of surcharge. Surcharge is applicable @ 10% where the total income exceeds Rs.50 lakh but does not exceed Rs. 1 Crore, while surcharge @ 15% continues if total income exceeds Rs. 1 Crore. Health and Education Cess @ 4%.
- Rebate of Rs. 2,500 is allowed only to resident individuals whose total income in the financial year does not exceed Rs. 3,50,000
- Senior citizens, who do not have any income from business, are exempted from payment of advance tax.
Income Tax on Capital Gains:
|Capital Gain on transfer of||Listed securities Sold through Recognized stock exchange and units of equity oriented Mutual Fund on which STT paid at the time of Sale||Listed securities on which STT is not paid at the time of sale||Other Capital Assets (Inclusive of Equity oriented Debt Oriented Mutual Funds)|
|Tax on Long Term Capital Gain||10%, for the gains exceeding Rs.100,000/-.
(Provided that STT is paid at the time of acquisition of shares if they are bought on or after 1st October, 2004)
|a) In case of Resident – 10 % on Capital Gains or 20% on Indexed Capital Gains whichever is beneficial to the assessee.
b) In case of Non Resident- 10% on Capital Gains
|20% on Indexed Capital Gains
|Tax on Short Term Capital Gain||15%||Add to Normal Income
(Taxed at normal rate)
|Add to Normal Income
(Taxed at normal rate)
- This is further subject to Surcharge, if any and Health and Education Cess @ 4%
- To qualify as a long-term asset, the holding period is to be:-
- Listed shares/ securities & units of Equity-oriented Funds 12 months
- Unlisted shares/ securities 24 months
- Any other capital asset 36 months
- Any Immovable Property (Land, building or both) 24 months
Prof. Megha Agrawal,