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Under India’s individual tax regime, different tax rates are assigned to respective income brackets (tax slabs), which is the income earned by a taxable person.

Starting from FY 2020-21 (AY 2021-22), taxpayers could opt for the new tax regime – where they paid income tax at lower rates but had to forgo certain exemptions and deductions available to those taxpayers who paid taxes as per the existing tax regime. Alternately, taxpayers could stick to the older tax regime and continue to avail respective exemptions and deductions.

Applicable Income Tax Rates in India

Income Tax Slab and Tax Rates Applicable in 2021-22

Income tax slab

New tax rates

INR 0 – INR 250,000 (US$3,418)

Nil

INR 250,000 – INR 300,000 (US$4,102)

5%

INR 300,000 – INR 500,000 (US$6,837)

5%

INR 500,000 – INR 750,000 (US$10,255)

10%

INR 750,000 – INR 1 million (US13,674)

15%

INR 1 million – INR 1.2 million (US$17,092)

20%

INR 1.2 million – INR 1.5 million (US$20,511)

25%

> INR 1.5 million (US$20,511)

30%

Difference Between the Old and New Tax Regimes

The difference between the income tax rates between 2019 and 2020 is shown in the tabulated form below.

Income tax slab

Existing regime slab rates

New regime slab rates from FY 2020-21 onwards

 

Resident individuals

< 60 years of age and NRIs

Resident individuals > 60 to < 80 years of age

Resident individuals > 80 years of age

Applicable for all individuals

INR 0 – INR 250,000 (US$3,418)

Nil

Nil

Nil

Nil

INR 250,000 – INR 300,000 (US$4,102)

5%

Nil

Nil

5%

INR 300,000 – INR 500,000 (US$6,837)

5%

5%

Nil

5%

INR 500,000 – INR 750,000 (US$10,255)

20%

20%

20%

10%

INR 750,000 – INR 1 million (US13,674)

20%

20%

20%

15%

INR 1 million – INR 1.2 million (US$17,092)

30%

30%

30%

20%

INR 1.2 million – INR 1.5 million (US$20,511)

30%

30%

30%

25%

> INR 1.5 million (US$20,511)

30%

30%

30%

30%

 

Taxes for Non-resident Indians and Foreign Nationals in India

An individual will be deemed an Indian resident, if they are not liable to pay tax in any country outside India on account of their domicile, residence, or any other criteria of similar nature. This is an anti-abuse provision and will apply only to income generated from a business or profession in India.

To hold non-resident status an individual must fulfill the following conditions: 

  • The individual concerned should not have resided in India for more than 182 days during the duration of a taxation.
  • The individual concerned should have resided in India for less than 365 days over the duration of the four years immediately prior to the taxation year in consideration.

Any foreign national employed or working in India is liable to pay income tax as per India’s tax law. In fact, all income accrued by an expatriate within India is taxable by law, regardless of the individual’s status of residence, citizenship, or intention of stay. This income may be deducted at source, although the individual would be entitled to a refund after filing tax returns in India if they earn less than the minimum exempted amount. Foreign nationals are also liable to pay tax on capital gains when they sell any capital assets within India.

If the individual has resided in India for a minimum of 60 days, but not more than 182 days, and has been residing in the country over the duration of the previous four years prior to the taxation year for a total equivalent to 365 days or beyond – they will be deemed to be an Indian resident for the purpose of taxation, and the total of their income earned within India will be taxable, according to India’s tax law.

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