Calculating Tax on 20 Lakhs Income in India

Introduction

When it comes to tax calculations in India, especially for an income of 20 lakhs (2,000,000 INR), understanding the difference between the old and new tax regimes is crucial. This article will guide you through the tax liabilities under both regimes and help you determine which option yields the least tax liability.

Old Tax Regime with Deductions

The old tax regime in India featured a stepwise increase in tax rates. Here’s how the tax is calculated for an income of 2,000,000 INR (20 lakhs).

Income up to 2.5 lakhs (250,000 INR): No tax liability. 2.5 lakhs to 5 lakhs (250,001 INR to 500,000 INR): Tax is 5% of 250,000 INR, which is 12,500 INR. 5 lakhs to 10 lakhs (500,001 INR to 1,000,000 INR): Tax is 20% of 500,000 INR, which is 100,000 INR. Above 10 lakhs (1,000,001 INR to 2,000,000 INR): Tax is 30% of 1,000,000 INR, which is 300,000 INR.

Total Tax liability: 12,500 INR 100,000 INR 300,000 INR 412,500 INR

New Tax Regime without Deductions

The new tax regime introduced a flat slab structure with incremental tax rates. Here’s the tax calculation for an income of 2,000,000 INR (20 lakhs).

Income up to 2.5 lakhs (250,000 INR): No tax liability. 2.5 lakhs to 5 lakhs (250,001 INR to 500,000 INR): Tax is 5% of 250,000 INR, which is 12,500 INR. 5 lakhs to 7.5 lakhs (500,001 INR to 750,000 INR): Tax is 10% of 250,000 INR, which is 25,000 INR. 7.5 lakhs to 10 lakhs (750,001 INR to 1,000,000 INR): Tax is 15% of 250,000 INR, which is 37,500 INR. 10 lakhs to 12.5 lakhs (1,000,001 INR to 1,250,000 INR): Tax is 20% of 250,000 INR, which is 50,000 INR. 12.5 lakhs to 15 lakhs (1,250,001 INR to 1,500,000 INR): Tax is 25% of 250,000 INR, which is 62,500 INR. Above 15 lakhs (1,500,001 INR to 2,000,000 INR): Tax is 30% of 500,000 INR, which is 150,000 INR.

Total Tax liability: 12,500 INR 25,000 INR 37,500 INR 50,000 INR 62,500 INR 150,000 INR 337,500 INR

Summary

Old Tax Regime: 412,500 INR

New Tax Regime: 337,500 INR

You can choose the regime that gives you a lower tax liability. Also, note that your final tax liability may include additional surcharges and cess.

ITR Filing for FY-2020–21

For ITR filing for the financial year 2020-21 (assessment year 2021-22), you need to calculate your tax under both the old and new tax regimes and file under the one that provides the least tax liability. This is crucial to ensure that you pay the minimum tax possible.

Furthermore, if your CTC (Cost to Company) is 20 lakhs, you will have to pay approximately 32,244 INR in tax without any investments. However, this can vary based on the tax regime and the inclusion of deductions and allowances.

Using our tax calculation tool, you can accurately determine your tax liability and make informed decisions for ITR filing.

Conclusion

Understanding the differences between the old and new tax regimes in India is essential when calculating your tax liability. Choosing the right regime can significantly impact your final tax payment. If you have any questions or need assistance, our expert team is here to help.