Tax Planning

Know Tax Slab Before Applying For ITR: Tax Filing 2019

income tax slabs

Before filing the income tax in India, it is essential that you know about the direct and indirect taxes that are applicable.

A direct tax is a tax that is paid on the income directly to the government. Indirect tax is that one pays to a restaurant or in a theater for the goods and services. This tax is then passed down to the government. Indirect taxes are of various forms. Like in a restaurant you pay service tax on the restaurant bill, and you pay VAT or value added tax on clothes and electronics.

The goods and service tax is now a unified tax which has replaced all the indirect taxes that a business had to deal with.

Basics Of Income Tax

Everyone who earns an income is subject to income tax. This is applicable to those Indians who live abroad as well. They pay income tax as income tax for NRIs. Your earnings could come from your income or your savings account that is earning an interest amount when in the bank account.

So the basic income tax payments are:

  • Rental income that comes from house and property
  • Income from the sale of a capital asset that draws a capital gains tax
  • Income got from a profession or a business where one works as a self-contractor or a freelancer. This is applicable also to insurance agents and tuition teachers
  • Income from fixed deposits and bank account interest

Income Tax Slab

How much income does each individual pay? To know the answer to this question one needs to know his income tax slab.

The income of every individual is grouped into blocks, and this is called income tax slabs. Each slab has a different rate of tax.

There are four tax brackets with an increasing tax rate:

  • For those earning an income of up to 500000, no tax needs to be paid
  • For income over Rs 5,00,001 lakhs but less than Rs. 5 lakhs the tax rate is 5%
  • For income between Rs.5 lakhs and less than Rs. 20 lakhs the tax rate is 20%.
  • For income that is above Rs. 10 lakhs the tax rate is 30%.

This is the income tax slab for the financial year 2018-2019. These income tax slabs may change from one financial year to the other. The income tax slab is for those who are less than 60 years of age. There are two other income tax slabs for those over 60 and less than 80 years of age and those above 80 years of age.

Also Read: Income Tax Saving Tips for Financial Year 2019-20

The income tax slabs for those individuals who are over 60 years of age and less than 80 years of age is:

Taxable income slabs Income tax rates and cess
Up to Rs 2.5 lakh Nil
Rs 2,50,001 to Rs 5,00,000 5% of (Total income minus Rs 2,50,000) + 4% cess
Rs 5,00,001 to Rs 10,00,000 Rs 12,500 + 20% of (Total income minus Rs 5,00,000) + 4% cess
Rs 10,00,001 and above Rs 1,12,500 + 30% of (Total income minus Rs 10,00,000) + 4% cess

The income tax slabs for these who are over 80 years of age is:

Taxable income slabs Income tax rates and cess
Up to Rs 5 lakh Nil
Rs 5,00,001 to Rs 10,00,000 20% of (Total income minus Rs 5,00,000) + 4% cess
Rs 10,00,001 and above Rs 1,00,000 + 30% of (Total income minus Rs 10,00,000) + 4% cess

How To Calculate Your Tax From The Income Tax Slabs

Most people calculate their tax wrongly in that they feel that if their salary is Rs.12 lakhs, then they need to pay 30% of 12 lakhs as their income tax. However, this is not so. A person who earns Rs.12 lakhs of income has to pay through the progressive tax system calculation. Here he will pay Rs.1,12,500+ Rs.60,000 = Rs. 1,72,500 and not Rs.3,60,000.

Exceptions To The Income Tax Slab

The capital gains tax is charged based on the asset that you own and also how long you have owned it.

  • For house property that is held for more than 36 months the tax rate is 20%. For the holding that is less than 36 months, the tax rate depends on the slab rate
  • For debt mutual funds if the holding is more than 36 months the tax rate is 20%. For holding that is less than 36 months the rate is charged as per the tax rate
  • For equity mutual funds the ones that are held for more than 12 months is exempted from tax. The equity mutual funds that are held for less than 12 months are taxed at 15%.
  • Shares held more than one year are exempted from tax. The shares that are held for less than 12 months are taxed at 15%
  • FMPs held more than 36 months are taxed at 20%. The FMPs that are held for less than 36 months are taxed depending on what the tax slab is

Indians who reside abroad and Indians who earn in foreign currency are taxed based on their residential status.

About Ajeet Sharma

Ajeet Sharma is a financial blogger & blogging since 2017. Financegab is a personal blog dedicated to personal finance. The main aim of this blog to help people to make well-informed financial decisions.
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