Filing Income Tax Return? Know Latest Income Tax slabs and Rates for AY 2019-20

The time for annual exercise of submitting income tax returns is upon us and soon many of us, if not all, are going to make the mad rush to file their income tax returns on time. As of now, the official deadline for filing returns for financial year (FY) 2018-19 i.e. assessment year (AY) 2019-20 is the 31^st of July 2019. However, before you actually start the process of filing income tax return, key information that you must keep in mind are the income tax slabs and rates for assessment year (AY) 2019-20.

Income Tax Slabs and Rates for Individual Tax Payers (AY 2019-20)

Income tax (IT) is termed as a progressive tax i.e. the applicable rate of taxation increases as the income of the assessee increases. The applicable rate of tax is determined by the income tax slab that an assessee falls into. Additionally, under existing income tax rules, IT slabs differ from one type of income tax assessee to another.

The following are the Income Tax slabs and rates for individuals aged less than 60 years of age, senior citizen tax payers (60 years to 80 years of age) and super senior citizen tax payers (over 80 years of age):

Note: The above income tax rates are for AY 2019-20 and additional surcharge/cess will be applicable as per applicable rules.            

Income Tax Slabs and Rates for non-Individual Tax Payers (AY 2019-20)

Income tax is payable by not just individuals but also by non-individual entities with an income such as HUF (Hindu Undivided Family), AOP (Association of Persons), BOI (Body of Individuals) and other artificial judicial persons. The applicable taxes on income of such entities feature the following IT slabs and rates:

Note: Surcharge/Cess will be applicable as per applicable rates. IT Slabs and rates correct as of AY 2019-20.

How to Calculate Income Tax Liability using IT Slabs and Rates

Income tax liability is defined as the amount of income tax that an assessee needs to pay for the applicable assessment year based on their income during the applicable period. Key considerations when calculating income tax liability for the applicable period are as follows:

●       The calculation of income tax payable is based on the concept of annual taxable income.

●       Annual taxable income = (Gross annual income) less (tax saving investments/applicable business expenses and house rent allowance).

●       Additionally, standard deduction (applicable to salaried and pensioners only) may also be deducted from the gross annual income to arrive at the annual taxable income figure.

Let’s suppose the annual taxable income of an income tax assessee aged less than 60 years is Rs. 8 lakh.

As per AY 2019-20 IT slabs and rates, income up to Rs. 2.5 lakh is exempt.

Amount exceeding Rs. 2.5 lakh and up to Rs. 5 lakh is taxed at 5% so tax liability of the assessee till Rs. 5 lakh= Rs. 12,500

The next slab rate is 20% and applicable to annual taxable income exceeding Rs. 5 lakh.

Thus income tax liability for this slab = (800,000 – 500,000 = 300,000) X 20% = Rs. 60,000.

Thus total income tax liability of the assessee aged less than 60 years for AY 2019-20 = Rs. 60,000 + Rs. 12,500 = Rs. 72,500.  

Now, let’s consider an alternative scenario. Suppose the annual taxable income is the same Rs. 8 lakh, however, the assessee is a super-senior citizen i.e. aged over 80 years.

In this case, the current income tax slab rate is nil for annual taxable income of Rs. 5 lakh.

Subsequently, a 20% Income Tax slab rate applies to income exceeding Rs. 5 lakh.

Thus total income tax liability in case of this super-senior assessee for AY 2019-20 = (800,000 – 500,000 = 300,000) X 20% = Rs. 60,000.

The Implication of Section 87A on Income Tax Liability

Section 87A of the Income Tax Act offers a rebate on income tax payable in case of low income assessees. As per Section 87A for AY 2019-20, the maximum rebate on offer is Rs. 2,500 for tax payers with annual taxable income of up to Rs. 3.5 lakh. But do remember, that this rebate does not apply if your annual taxable income exceeds Rs. 3.5 lakh. The following is a comparative illustration of how this relief will work:

Note: The above case is based on Section 87A rules as of FY 2018-19 (AY 2019-20). This relief rule has now been modified as of FY 2019-20 to a maximum relief of Rs. 12,500 on annual taxable income up to Rs. 5 lakh. This benefit will be applicable to those filing their income tax returns in AY 2020-21.  

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