How much tax does an individual pay per year

If you’ve recently started working, one of the most important things you should know about is taxation. Read this post to know how much income tax an individual pays to the Income Tax (IT) department every year.

It is with the tax money that the Government develops the nation, uplifts the society, improves infrastructure and introduces welfare initiatives.

But for people who have recently started working or about to get employed soon, a common concern is ‘How much tax do I have to pay?’ If you are struggling with the same question too, the first thing you need to know about is the different tax slabs.

Income tax slabs in India

The income tax liability depends on the income tax slab you fall under in a particular financial year. Each slab has a different income tax rate. Moreover, apart from earnings, the tax rates also vary for different age groups. Here is a list of different tax slabs for different age groups currently applicable in India:

1. Individuals below 60 years

If you are below the age of 60 years, the individual tax slabs applicable to you are as follows:

Tax slabs	Tax rates
Annual income of up to Rs 2,50,000	Nil
Annual income between Rs 2,50,001and Rs 5,00,000	5% tax on the income above Rs 2.5lakh + 4% cess
Annual income between Rs 5,00,001 and Rs 10,00,000	Rs 12,500 + 20% tax on the income above Rs 5lakh + 4% cess
Annual income above Rs 10,00,001	Rs 1,12,500 + 30% tax on the income above Rs 10 lakh + 4% cess

2. Seniors between 60 years and 80 years

For seniors between the age group of 60 and 80 years, the tax slabs are as follows:

Tax slabs	Tax rates
Annual income of up to Rs 3,00,000	Nil
Annual income between Rs 3,00,001 and Rs 5,00,000	5% on the income above Rs 3 lakh + 4% cess
Annual income between Rs 5,00,001 and Rs 10,00,000	Rs 10,000 + 20% tax on the income above Rs 5 lakh + 4% cess
Annual income above Rs 10,00,001	Rs 110,000 + 30% tax on the income above Rs 10 lakh + 4% cess

3. Super seniors above 80 years

Resident individuals above the age of 80 years are considered super seniors. Tax slabs for them are as follows:

Tax slabs	Tax rates
Annual income of up to Rs 5,00,000	Nil
Annual income between Rs 5,00,001and Rs 10,00,000	20% tax on the income above Rs 5 lakh + 4% cess
Annual income above Rs 10,00,001	Rs 100,000 + 30% tax on the income above Rs 10 lakh + 4% cess

How to pay income tax?

Now that you know the individual tax rates, you might be wondering how you will pay the income tax to the Government. There are basically two ways in which the Government collects income tax from the taxpayers:

1. Tax Deducted at Source (TDS)

As the name suggests, the TDS taxation system deducts the tax right from the source where the income originates. For instance, if you are a salaried employee, your employer will deduct TDS from your salary before crediting it to your bank account. The employer then pays your TDS to the Government.

2. Self-assessment and advance tax

If your actual income tax liability is higher than the TDS you have paid, you have the self-assessment option to pay the remaining tax amount to the IT department. Similarly, if you have other sources of income where TDS is not applicable, you can pay advance tax on the same. But make sure that you always pay your tax liabilities in full before Mar 31 every year.

Understanding taxation in India

Taxation is a complex subject that you will only get better at with time. If you are just starting your professional life, the details mentioned in this post are sure to answer several of your queries on individual taxation.

You can consult the relationship manager of your bank or a tax consultant to know more about taxation and understand how income tax is calculated.

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