What are the Latest Income Tax Slab Rates for FY 2021-22 / AY 2022-23 after Budget 2021? Is there any changes to applicable tax rates for individuals? Let us see the details.
In this post, my concentration is to share with you about the Latest Income Tax Slab Rates for FY 2021-22 / AY 2022-23 and applicable Security Transaction Tax (STT).
Budget 2021 Key Highlights
# ULIPs are Taxable!!
Finance Bill 2021-22 has proposed to tax on the gains from ULIPS where the premium is more than Rs. 2.5 lakh per year to remove the disparity relative to mutual funds.
If you buy any ULIPs after 1st February 2021 thinking the tax benefits at maturity by comparison to Mutual Funds, then this is going to off from FY 2021-22.
The maturity proceeds will be taxed identically to mutual funds. Death benefits continue to remain tax-free regardless less of the premium amount. This will reduce mis-spelling of ULIPs.
# EPF Interest on contributions above Rs.2.5 lakh is taxable!!
Effective from 1st April 2021, the interest on any contribution above Rs. 2.5 lakh by an EMPLOYEE to a recognised provident fund is taxable as per the provisions of the Finance bill 2021.
This includes employee’s EPF and VPF contribution also.
# Section 80EEA Tax Benefit extended up to March 2022
During the union budget 2019, Government has introduced a new section 80EEA to extend the tax benefits of the interest deduction up to Rs 1,50,000 for housing loan taken for affordable housing during the period 1 April 2019 to 31 March 2020. This is further now extended up to 31st March 2022. The individual taxpayer should be a first-home buyer and should not be entitled to deduction under section 80EE.
# Pre-Filled Income Tax Forms contain Capital Gains
Earlier in the pre-filled income tax forms, they used to contain salary, one house property, other source and agricultural income up to Rs. 5,000. However, effective from 1st April, 2021, the details of Capital Gains (Long term & Short Term), Dividend Income and Interest income will be pre-filled in the Income Tax Return Forms.
# In case of Bank failure, Rs.5 lakh Deposit Insurance available immediately
Earlier, even though the banks are covered under Deposit Insurance, if the banks fail, then you are forced to wait for the withdrawal or there are certain restrictions on withdrawal. However, now there are no such waiting.
If your bank is covered under Deposit Insurance and the bank fails or bankrupt means, you no need to wait for your money. You can withdraw it instantly BUT up to Rs.5 lakh.
# No Change in Income Tax Slab Rates
Yes, there is no change in Income Tax Slab Rates from what it was last year. Even in case of Mutual Funds, there is no change. Refer the latest Mutual Fund Taxation Rules at “Mutual Fund Taxation FY 2021-22 / AY 2022-23 | Capital Gain Tax Rates“.
# No Change in your Tax Saving Options like Sec.80C
In terms of tax saving options, also, there is no change in the limits of 80C or other sections.
# No need to file Income Tax Return if someone is 75 years old or more
Filing of Income Tax is now exempted for those whose age is 75 years or more. However, do remember that this facility is available for those who have income like PENSION and INTEREST INCOME.
Exempt from ITR filing does not mean exempt from tax. The pension provider or the Banks will deduct the TDS. Hence, the senior citizens not required to file ITR.
Hence, it is just avoiding the process but not tax benefit for senior citizens.
However, to qualify for this, there are certain conditions like below.
(i) who is of the age of seventy-five years or more at any time during the previous year;
(ii) who is having income of the nature of pension and no other income except the income of nature
of interest received or receivable from any account maintained by such individual in the same specified
bank in which he is receiving his pension income; and
(iii) has furnished a declaration to the specified bank containing such particulars, in such form and
verified in such manner, as may be prescribed.
# Reopening of Income Tax Assessment period is reduced
Earlier reopening of your your ITR was 6 years and in serious fraud cases it was up to 10 years. Now it is reduced to 3 years for reopening of IT Assessment and in case of serious fraud the cases will be reopened if the fraud is more than 50 lakh or more (but years will remain as usual like 10 years).
These are the important highlights which I have heard during the FM’s Budget 2021 speech. I will update this section once I get the full clarity.
The difference between Gross Income and Total Income or Taxable Income?
Before jumping into Latest Income Tax Slab Rates for FY 2021-22 / AY 2022-23, first, understand the difference between Gross Income and Total Income.
Many of us have the confusion of understanding what is Gross Income and what is Total Income or Taxable Income. Also, we calculate the income tax on Gross Income. This is completely wrong. The income tax will be chargeable on Total Income. Hence, it is very much important to understand the difference.
Gross Total Income means total income under the heads of Salaries, Income from house property, Profits and gains of business or profession, Capital Gains or income from other sources before making any deductions under Sections.80C to 80U.
Total Income or Taxable Income means Gross Total Income reduced by the amount of permissible as deductions under Sec.80C to 80U.
Therefore your Total Income or Taxable Income will always be less than the Gross Total Income.
Latest Income Tax Slab Rates for FY 2021-22 / AY 2022-23
There were no changes proposed in this Budget 2021 with respect to income tax slab rates. Hence, the old rates will continue for FY 2021-22 or AY 2022-23
There will be two types of tax slabs.
- For those who wish to claim IT Deductions and Exemptions.
- For those who DO NOT wish to claim IT Deductions and Exemptions.
Let me explain both the slabs as below.
Latest Income tax slab rates for FY 2021-22 AY 2022-23
Now, if you wish to choose the new tax regime, then you have to forget the below deductions or exemptions.
(i) Leave travel concession as contained in clause (5) of section 10;
(ii) House rent allowance as contained in clause (13A) of section 10;
(iii) Some of the allowance as contained in clause (14) of section 10;
(iv) Allowances to MPs/MLAs as contained in clause (17) of section 10;
(v) Allowance for income of minor as contained in clause (32) of section 10;
(vi) Exemption for SEZ unit contained in section 10AA;
(vii) Standard deduction, deduction for entertainment allowance and employment/professional tax as contained in
section 16;
(viii) Interest under section 24 in respect of self-occupied or vacant property referred to in sub-section (2) of section 23.
(Loss under the head income from house property for rented house shall not be allowed to be set off under any
other head and would be allowed to be carried forward as per extant law);
(ix) Additional deprecation under clause (iia) of sub-section (1) of section 32;
(x) Deductions under section 32AD, 33AB, 33ABA;
(xi) Various deduction for donation for or expenditure on scientific research contained in sub-clause (ii) or sub-clause
(iia) or sub-clause (iii) of sub-section (1) or sub-section (2AA) of section 35;
(xii) Deduction under section 35AD or section 35CCC;
(xiii) Deduction from family pension under clause (iia) of section 57;
(xiv) Any deduction 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). However, deduction under
sub-section (2) of section 80CCD (employer contribution on account of the employee in notified pension scheme) and
section 80JJAA (for new employment) can be claimed.
However, there are certain deductions you can still claim using the new tax regime and they are as below.
- Retirement benefits, gratuity etc.
- commutation of pension
- leave encashment on retirement
- retrenchment compensation
- VRS benefits
- EPFO: Employer contribution
- NPS withdrawal benefits
- Education scholarships
- Payments of awards instituted in public interest
Which one to use for the highest tax benefits?
It is not yet clear and hence it is hard for me to say anything BLINDLY. However, going by changes, I assume it changes from individual to individuals. Hence, you have to calculate on your own and adopt the one which is more beneficial for you.
CONFUSING RIGHT? YES, as per me, this new tax slab regime is the most complicated tax slab rate any government introduced. Now many individuals will be in a dilemma of which one to use, the ADDITIONAL one along with the existing headache for taxpayers of HOW TO SAVE MORE TAX.
Note: – Along with the applicable taxes, you have to additional surcharges at below rates.
- Surcharge:
- 10% surcharge on income tax if the total income exceeds Rs.50 Lakhs but below Rs.1 Cr.
- 15% surcharge on income tax if the total income exceeds Rs.1 Cr.
- Health and Education cess : 4% cess on income tax including surcharge. This Health and Education Cess replaced the earlier 2% Education Cess and 1% Secondary and Higher Education Cess from Budget 2018.
Whether the interest earned from PPF, EPF, or SSY (Sukanya Samridhi Yojana) is taxable?
There is one more confusion among many of us that if one adopted the new tax regime, then whether the PPF, EPF or SSY will remain tax free? The answer is YES.
Once you adopt the new tax slab by not using any deductions or exemptions, you are just forgoing the tax saving part of these schemes. However, the interest earned and maturity amount will remain tax free for you as it was earlier.
Earlier these products used to classified as EEE (Exempt-Exempt-Exempt) but now they turned into TEE (Taxable-Exempt-Exempt).
Security Transaction Tax (STT) Rates for FY 2021-22
Below is the STT Rates applicable for FY 2021-22.
Conclusion:- There is no huge change in Budget 2021 in terms of personal finance. Hence, no impact on many individuals.
Source: Financial express, Economic times.
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