Every salaried person is required to pay income tax depending on the slab system into which they fall. The income tax slab depicts the various tax rates imposed for various income levels.
The income tax bracket has not been changed in the current budget 2022. The new income tax system was established in Budget 2020 and went into effect beginning with the fiscal year 2020-21.
Let us now look at the new income tax slab rates for fiscal years 2021-22 and 2022-23.
What is the income tax slab?
Individual taxpayers in India pay income tax based on an income tax slab structure. A slab system implies that various tax rates are specified for different income groups. It indicates that tax rates continue to rise as the taxpayer’s income rises.
These income tax slab rates vary for various types of taxpayers. Income tax includes three kinds of “individual” taxpayers, including:
- Individuals (under the age of 60), both residents and non-residents
- Senior folks who live locally (60 to 80 years of age)
- Residents who are super elderly citizens (aged more than 80 years)
Income Tax Slab Rate for FY 2021-2022- Applicable for New Tax Regime
Taxpayers under this new system have the OPTION of either:
- To pay income tax at reduced rates under the New Tax system in exchange for foregoing certain allowed exemptions and deductions available under income tax.
- Or to continue paying taxes at the current tax rates. The assessee may take advantage of refunds and exemptions by remaining in the previous system and paying tax at a present higher rate.
- The tax rates under the new tax system are the same for all groups of persons, namely individuals and HUF up to 60, senior citizens between the ages of 60 and 80, and super senior citizens above the age of 80. As a result, the new tax system will provide no advantage of enhanced essential exemption limit benefits to old and super senior individuals.
- Individuals having a net taxable income of less than or equal to Rs. 5 lakh would be eligible for tax relief under Section 87A of the Income Tax Act. Such persons will have no tax responsibility in both the new and old tax systems.
- The baseline exemption ceiling for NRIs is Rs. 2.5 lakh, regardless of age.
- A 4% health and education cess will be applied to the income tax obligation in all situations.
Benefits of Filing Income Tax Return
Filing ITR might also be beneficial to you. Here are some ways that submitting an income tax return might help you.
1. It Acts as a Legal Document
The Income Tax Return has enormous legal significance. It’s on file with the government. It serves as legal evidence in two ways.
- Identity Proof: The return you fill out may be used as identification evidence in a variety of situations, such as when applying for an AADHAR card or any other document. It is also accepted as evidence of address by the authorities.
- Income Proof: As previously stated, the ITR form includes a full record of all your revenues and spending. The tax you must submit is computed on this basis.
As a result, ITR may also be used since income evidence, as certain transactions, such as the acquisition of real estate, need proof of income. This might be useful for self-employed individuals who do not get Form 16.
2. Can help you Claim Deductions
The government offers some deductions to you in order to decrease the burden on taxpayers and encourage more individuals to pay their taxes.
- These deductions and exemptions may be used in certain investments to reduce the amount of tax you eventually pay.
- TDS and refunds are also refundable.
However, in order to take advantage of these tax breaks, you must submit an income tax return. You cannot claim deductions if you have not submitted an ITR.
3. Important Document While Applying for Loans
When you apply for a loan to buy anything, such as a vehicle or a new house for your family or company, the bank asks you to provide certain documentation.
- Aadhar card
- PAN card
- Driver’s license
- Photo ID etc
One key document requested is evidence of income. Banks often requested ITR for the previous three years. This is done to examine your history and present financial condition, as well as whether or not you will be able to repay the loan.
Not only may ITR be used to apply for bank loans, but it can also be used to get a credit card. Before providing you with a credit card, credit card issuers will often request your previous income and tax records.
4. Helps if Planning to go Abroad
Going abroad necessitates some formalities. If you do not submit your ITR, your intentions to go overseas may be jeopardized. The ITR form is one of the papers needed by the countries you want to visit.
This is due to the following factors:
- Filing income tax returns in the past strengthens your case and increase your chances of acquiring a visa.
- It provides the embassy with information about your financial condition.
5. Avoid Penalty and Punishment
The Income Tax Act of 1961 governs the taxes that apply to you. As a result, if your income exceeds the exempt threshold, you must pay taxes.
So, if you are entitled to pay taxes on your income but fail to submit your Income Tax Returns, you will face penalties.
The income tax officer has the authority to assess a penalty of up to Rs 5000. If you do not submit returns, you may face further harsh penalties.
As a result, you should submit an ITR to avoid such fines and consequences.
6. Losses can be Carried, Forward
Sections 70 and 71 of the Income-tax Act of 1961 provide provisions for carrying over losses from one year to another. This implies you may defer your loss until the next evaluation year.
Wrapping It Up
Filing your income tax return benefits both you and the country. The government uses the tax you pay to create infrastructure and enhance other national amenities such as medical care and defense.