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Every year, Income Tax payers will be watching the Union Budget to see whether there is a change in the Income Tax slab rates. There used to be some relaxation in Income Tax slab rates in every Budget. But this year, the Budget was a disappointment for taxpayers, because there is no change in the Income Tax slab rates for the Financial Year 2013-14.  With a very high level of consumer inflation, tax payers are disappointed over the recent Budget.

Income Tax Slab Rates

Income Tax is calculated on a slab system. There are 3 tax slabs of 10%, 20% and 30% in India.  Please see the below given table, giving details of Income Tax slab rates in India for the Financial Year 2013-14.

Income Tax slab rates for the FY 2013-14 (for those aged up to 60)

Income Tax Slab

Tax

Up to Rs. 2 Lakhs

No Tax

Rs. 2,00,001 – Rs. 5 Lakhs

10% for the amount in excess of Rs. 2 Lakhs

Rs. 5,00,001– Rs. 10 Lakhs

Rs. 30,000 + 20% for the amount in excess of Rs. 5 Lakhs

Above Rs. 10 Lakhs

Rs. 1,30,000 + 30% for the amount in excess of Rs. 10 Lakhs

For Senior Citizens aged 60, but below 80, there is no tax up to an income of Rs. 2.5 Lakhs. For them, the Income Tax slab rates for FY 2013-14 will be as given below:

Income Tax slab rates for the FY 2013-14 (for Senior Citizens aged 60 to 80)

Income Tax Slab

Tax

Up to Rs. 2.5 Lakhs

No Tax

Rs. 2,50,001 – Rs. 5 Lakhs

10% for the amount in excess of Rs. 2.5 Lakhs

Rs. 5,00,001 – Rs. 10 Lakhs

Rs. 25,000 + 20% for the amount in excess of Rs. 5 Lakhs

Above Rs. 10 Lakhs

Rs. 1,25,000 + 30% for the amount in excess of Rs. 10 Lakhs

 

For very Senior Citizens aged 80 and above, there is no tax up to an income of Rs. 5 Lakhs. The Income Tax slab rates for them for the FY 2013-14 will be as given below:

Income Tax slab rates for the FY 2013-14 (for Senior Citizens aged 80 and above)

Income Tax Slab

Tax

Up to Rs. 5 Lakhs

No Tax

Rs. 5,00,001 – Rs. 10 Lakhs

 20% for the amount in excess of Rs. 5 Lakhs

Above Rs. 10 Lakhs

Rs. 1,00,000 + 30% for the amount in excess of Rs. 10 Lakhs

In addition to the tax as per the above Income Tax slab rates, you have to pay 3% of the tax as education cess. If your tax calculated as per the above slab is Rs. 35,000, you have to pay another Rs. 1,050 as education cess.

Changes in the recent Budget for FY 2013-14

For the Financial Year 2013-14, there is a tax credit of Rs. 2,000, if your income is up to Rs. 5 Lakhs. But you have to pay a surcharge of 10%, if your income is above Rs. 1 Crore.

Tax Credit of Rs. 2,000. What is it?

It is a deduction of Rs. 2,000 from your tax liability. If your taxable income is Rs. 5 Lakhs, as per the Income Tax slab rates, you will have to pay an Income Tax of Rs. 30,000. You also have to pay 3% of Rs. 30,000 as education cess. So, your total tax outgo will be Rs. 30,900/-.

As per the recent Budget, you will get a tax credit of Rs. 2,000 for the Financial Year 2013-14. In the above example, your tax liability will be reduced to Rs. 28,000. With 3% education cess, this comes to Rs. 28,840. So as per this Budget proposal, you will stand to gain Rs. 2,060 (Rs. 30,900 – Rs. 28,840 = Rs. 2,060) for the FY 2013-14. So, all taxpayers up to an income of Rs. 5 Lakhs for the FY 2013-14 will get a reduction of Rs. 2,060, because of this tax credit.

Calculation of tax as per the Income Tax slab rates – examples

Let’s calculate the actual tax liability to explain the Income Tax slab rates. We will calculate the tax for taxable income of Rs. 4.25 Lakhs, Rs. 8.50 Lakhs and Rs. 13 Lakhs for the FY 2013-14.

1. Taxable Income of Rs. 4.25 Lakhs

Here, the tax calculation will be as follows:

First Rs. 2 Lakhs = Nil

Rs. 2,00,001 – Rs. 4.25 Lakhs = Rs. 22,500 (10% of Rs. 2,25,000)

You are eligible for the tax credit of Rs. 2,000. So, tax liability will be Rs. 20,500.

Also add 3% education cess on the Income Tax of Rs. 20,500. With this Rs. 615, your total tax outgo will be Rs. 21,115 for the FY 2013-14.

2.   Taxable Income of Rs. 8.50 Lakhs

Here, the tax calculation will be as follows:

First Rs. 2 Lakhs = Nil

Rs. 2,00,001 – Rs. 5 Lakhs = Rs. 30,000 (10%)

Rs. 5,00,001 – Rs. 8.5 Lakhs = Rs. 70,000 (20%)

So, the total tax will be Rs. 1 Lakh. Also add 3% education cess on Rs. 1 Lakh. So, the total tax outgo will be Rs. 1,03,000.

3.   Taxable Income of Rs. 13 Lakhs

Here, the tax calculation will be as follows:

First Rs. 2 Lakhs = Nil

Rs. 2,00,001 – Rs. 5 Lakhs = Rs. 30,000 (10%)

Rs. 5,00,001 – Rs. 10 Lakhs = Rs. 1,00,000 (20%)

Rs. 10,00,001 – Rs. 13 Lakhs = Rs. 90,000 (30%)

The total tax will be Rs. 2,20,000. Also add 3% education cess on Rs. 2,20,000. The total tax outgo will be Rs. 2,26,600.

What you can do?

An understanding of the Income Tax slab rates is very useful to all taxpayers. This can help you in reducing your tax liability by tax planning. By making certain investments, you can really reduce your taxable income and may even pay tax at the reduced slab rates. You have to update your understanding on Income Tax slab rates after each Budget, to take the maximum benefit out of tax planning.

 

2 Comments

  • Harinathan.k Posted October 7, 2013 5:34 pm

    A person receives EPF Pension, LIC Annuity from employment, Rental Income and FD Interest. Under what categoty will be classified to file return

    • Melvin Joseph Posted October 31, 2013 6:15 pm

      Other income head

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