Income Tax Above 5 Lakh

What is Tax?

Taxes are considered an obligatory contribution that every individual has to make who earns income in India in any form and falls under the tax slab category. Taxes are collected from the citizens of the country to upgrade the Indian economy and standard of living. They can be applicable only after the State Legislative or the Indian Parliament passes the law.

Types of Taxes

There are major 3 types of taxes applicable to the citizens of India, namely:

• Direct taxes

• Indirect taxes

• Other taxes

Both direct taxes and indirect taxes have many sub-categories and different implementations from one another that helps in avoiding double taxation problems.

Apart from the traditional direct and indirect taxes, there are other taxes too that are launched keeping specific agenda in mind by the Government of India. Other taxes are applicable on both direct as well as indirect taxes like Infrastructure Cess, Swachh Bharat Cess Tax, Krishi Kalyan Cess, etc.

Below mentioned are some of the main taxes levied by the Government of India on its citizens.

Overview of the Tax Slab

Here is the overview of Income Tax Slab Rates for the Financial Year 2024 – 2025 (Assessment Year 2025 – 2026). It is important to note that some changes were made in the Union Budget in July 2024.

Major Changes Made Under Union Budget 2023:

• The whole income tax slab structure and its associated tax rates are changed. 

• Taxpayers can continue with the old tax structure, or the new tax slab rates will be applicable by default.

• Either the Old or the New tax regime can be followed for the payment of tax.

• The tax rebate offered under Section 87A of the Income Tax Act, 1961, is increased from Rs. 12,500 to up to Rs. 25,000.

• As per the new tax regime, an individual earning up to Rs. 7,00,000 (earlier Rs. 5,00,000) does not fall under the tax paying category, irrespective of the tax regime followed.

• Once opted for a new tax regime, a taxpayer can never switch back to the old regime in their lifetime.

• If no investments are made throughout the financial year, along with income not exceeding Rs. 7,00,000 (earlier, this limit was Rs. 5,00,000), an individual does not fall under the tax paying category.

Sections That Come Under Income Tax

Here is the list of sections that fall under the income tax category and the maximum claims an individual can make while filing the income tax return.

New Income Tax Slab Rate Table

New income tax slab rates were introduced in the Financial Year 2024 – 2025 for AY 2025-26. It has given individual taxpayers the option of going for the new income tax regime or continuing with the old income tax regime. Here is the table with new tax rates as applicable to the annual income.

It Is Important to Know That:

• The new income tax regime is the same for all the categories of individuals and HUFs, be they below 60 years or above 80 years of age.

• Individuals earning equal to or less than Rs. 7 lakhs annually are eligible for tax rebates under Section 87A, making the tax liability NIL.

• The exemption limit in the case of NRIs (Non-Resident Indians) is Rs. 2,50,000, irrespective of age.

• A 4% health and educational cess is applicable to the income tax liability.

Surcharge

The cess and surcharge on income tax payable are applicable if the total income of the assessee exceeds the below-mentioned limits:

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Example of Income Tax Rate Calculated Under New Regime

Income Tax Slab Rates: New Tax Regime Vs. Old Tax Regime

The new Union Budget 2023 declared new tax slab rates applicable by default from 1st April 2023. Let us understand the significant changes brought in the income tax calculation for the FY 2024-25 (Assessment Year 2025-26) from the table below:

Previous Tax Regimes of FY 2019-20 and FY 2020-21:

Summing It Up!

The new tax regime promises to encourage the whole spectrum of taxpaying individuals, as no liabilities are charged if the income earned annually is less than Rs. 7 lakhs. Also, for the High Net-worth Income (HNI) class earning annual income above Rs. 5 crores, the previous surcharge rates got reduced from 37% to 25%. With the due enforcement of the new tax regime, the benefits or the disadvantages will be analysed in the upcoming financial year.

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