Basic exemption limits and tax rates applicable to individuals

As per section 4 of income tax act 1961, the total income of the previous year of an assessee shall be charged to income tax at the rates prescribed in the finance act as applicable to the relevant assessment year.

Even though, rates are prescribed in finance act, income shall be charged in accordance with and subject to the provisions of the income tax act.

What is basic exemption limit

Basic exemption limit is the amount of taxable income on which you are not required to pay tax. This means tax rate on an amount equal or less than basic exemption limit is Nil.

Basic exemption limit has been set for an individual based on his age and residential status. For this purpose, a resident individual based on age has been divided into following three categories;

  • Below the age of 60 years
  • 60  years of age and above, but below 80 years – resident individual within this age limit are known as “senior citizens”.
  • Above 80 years of age – Resident Individual falling into this category are known as “super senior citizens”.

The above mentioned age limit has to be attended at any time during the previous year.

This means, if you have attended 60 years of age during the previous year 2018-19, then you will be considered as a senior citizen for the financial year 2018-19 relevant to the assessment year 2019-20. Same logic is also applicable to financial year 2019-20 as no changes are made to this limit.

Here is the basic exemption limit applicable to individuals for the financial year 2018-19 and 2019-20;

Basic exemption limitCategory of resident individual
Rs 2,50,000For below the age of 60 years
Rs 3,00,000senior citizen
Rs 5,00,000super senior citizen

For non-resident individuals (NRI), the basic exemption limit is Rs. 2,50,000 irrespective of age of the assessee.

Rate of tax for an Individual

For the assessment year 2019-20 (FY 2018-19) and 2020-21 (FY 2019-20), the income tax rate is as follows;

Income tax slabs for resident individual below 60 years of age :-

Taxable IncomeTax rates
Up to Rs 2,50,000 (Basic exemption limit)Nil
Above Rs 2,50,000 up to Rs 5,00,0005%
Above Rs 5,00,000 up to Rs 10,00,00020%
Above Rs 10,00,00030%

Income tax slabs for a senior citizen (a resident individual who is between 60 and 80 years of age) :-

Taxable IncomeTax rates
Up to Rs 3,00,000 (Basic exemption limit)Nil
Above Rs 3,00,000 up to Rs 5,00,0005%
Above Rs 5,00,000 up to Rs 10,00,00020%
Above Rs 10,00,00030%

Income tax slabs for a super senior citizen (a resident individual who is above 80 years of age) :-

Taxable IncomeTax rates
Up to Rs 5,00,000 (Basic exemption limit)Nil
Above Rs 5,00,000 up to Rs 10,00,00020%
Above Rs 10,00,00030%

Please remember, above basic exemption limit and rate of tax shall applicable to both men and women.

Surcharge, Health and Education Cess

Surcharge is charged on above tax rates if net income exceeds Rs 50 Lakh. Surcharge at the rate of 10% on above basic tax rates is to be charges when net income exceeds Rs 50 Lakhs but below Rs 1 Crore.

Instead of 10%, surcharge has to be charged at the rate of 15% if the net income exceeds Rs 1 Crore.

Please remember that the surcharge at above rate is levied before levy of health and education cess.

Health and education cess has been levied on the aggregate amount of tax and surcharge payable, at the rate of 4%.

If surcharge is not applicable to the individual, then health and education cess at the rate of 4% has to be charged on aggregate amount of tax.

Tax Rebate Under Section 87A

For the assessment year 2019-20 (FY 2018-19), you are eligible for tax rebate under section 87A if your taxable income is equal to or less than Rs 3,50,000.

The amount of rebate that can be claimed under section 87A is 100% of the tax calculated on taxable income or Rs 2500, whichever is less. 87A rebate is deductible before charging cess.

If after deduction, your tax liability is nil, then cess will also be calculated as nil, as a result you are not required to pay any tax.

In the interim budget 2019, government of India has announced a rebate of Rs. 12,500 for taxpayers with taxable income of up to Rs. 5,00,000. It will be applicable from 1st April 2019.

Example to understand how tax liability is calculated

Example -1

For example, Mr X is a resident individual has disclosed us following details to calculate his tax liability;

  • Gross total income – Rs 10,50,000
  • Age – 59 years
  • Insurance premium paid during the year – Rs. Rs. 10,000

Here is the computation of Mr. X for the assessment year 2019-20.

ParticularsAmount in Rupees
Gross Total IncomeRs 10,50,000
Less: Deduction under section 80C for investing in life insurance policy(Rs 10,000)
Taxable IncomeRs 10,40,000
Tax payable on Rs 10,40,000 
–     The first Rs. 250000 (basic exemption limit)Nil
–     From Rs 2,50,001 to Rs 5,00,000 charged at the rate of 5%Rs 12,500
–     From Rs 5,00,001 to Rs 10,00,000 charged at the rate of 20%Rs 1,00,000
–     On balance Rs. 40,000 charged at the rate of 30%Rs 12,000
TotalRs 1,24,500
Add: Health and education cess charged at the rate of 4% on Rs 1,24,500Rs 4,980
Total Tax PayableRs 1,29,480

Note: Surcharge and rebate under section 87A not applicable as taxable income does not exceed the specified limit.

Example – 2

Mr Y is working in a company XYZ pvt limited and getting taxable salary of Rs 10, 90,000. Amount invested in Life insurance policy with LIC is Rs 10,000. Below is his calculation for the assessment year 2019-20 ( i.e. financial year 2018-19).

Particulars of slab Amount in Rupees
Gross total income 10,90,000
Less:Deduction under section 80C for investing in life insurance policy                    10,000
Taxable Income 10,80,000
Salary up to Rs 2.5 lakhs Nil
Salary between Rs 2.5 Lakhs and Rs 5 Lakhs   [ 5% on Rs 2,50,000 (i.e. 5 Lakh minus 2.5 Lakh) ] 12,500
Salary between Rs 5,00,000 and Rs 10,00,000   [ 20 % on Rs 5,00,000 (i.e. 10 Lakh minus 5 Lakh) ] 1,00,000
Salary on balance Rs 80,000   [ 30% on Rs 80,000 (Rs 10,80,000 minus Rs 10,00,000) ] 24,000
Total 1,49,000
Health and education cess @ 4% 5,960
Total Tax Payable 1,54,960

Income Tax act,1961 also prescribe specified rates for certain types of income. For instance, section 112 prescribes rate of tax as 20% in respect to long term capital gains.

is a fellow member of the Institute of Chartered Accountants of India. He lives in Bhubaneswar, India. He writes about personal finance, income tax, goods and services tax (GST), company law and other topics on finance. Follow him on facebook or instagram or twitter.