Do you know that manufacturing companies incorporated after 01st Oct, 2019 can opt for an optional tax rate and pay 15%?
We have stepped into the new Financial year. Definitely new year may have some changes in the tax rates. Here we come up with an article which gives detailed information about the tax structure applicable for FY 2020-21.
Tax structure for Companies:
For Domestics Companies:
For those who opt for New Tax Regime: Tax Rate 22% + Applicable Surcharge & Cess
For those who opt for Old Tax Regime and Gross turnover up to Rs. 400 Crore: Tax Rate 25% + Applicable Surcharge & Cess
Tax structure for individuals up to 60 years age:
For those who opt for New Tax Regime:
| Income tax slab | Tax rate |
| If income is up to 2.5 Lakhs | Nil |
| From 2.5 Lakhs to 5 Lakhs | 5% of total income + cess 4% |
| From 5 Lakhs to 7.5 Lakhs | 10% of total income more than 5 Lakhs plus 4% cess |
| From 7.5 Lakhs to 10 Lakhs | 15% of total income more than 7.5 Lakhs plus 4% cess |
| From 10 Lakhs to 12.5 Lakhs | 20% of total income more than 10 Lakhs plus 4% cess |
| From 12.5 Lakhs to Rs 15 Lakhs | 30% of total income more than 15 Lakhs plus 4% cess |
The above is the new tax regime. This tax structure is optional for individuals. If you follow the new structure, the deduction that you were getting in 80C, 80D and HRA will be completely waived off. i.e. LIC Premium, housing loan principal and all the other benefits taken in section 80C would not be available for you. Your tax would be determined directly as per the above rates. Even benefit of rebate of Sec 87A will not be available.
Old tax rate structure for individuals can also be taken. If you are going with the old tax structure, then you get all the 80C and 80D deduction benefits.
For those who opt for Old Tax Regime:
| Income tax slab | Tax rate |
| If income is up to 3 Lakhs | Nil |
| From 2.5 Lakhs to 5 Lakhs | 5% of total income |
| From 5 Lakhs to 10 Lakhs | 20% of total income more than 5 Lakhs |
| Above 10 Lakhs | 30% of total income more than 10 Lakhs |
Tax structure for LLP
If net income is up to Rs 1 Crore:
Tax rate 30% plus 4% cess
If net income is more than 1 Crore:
Rs 30 Lakhs + 30% + 12% cess on taxes and 4 % cess
The above is a synopsis of the tax rate applicable to Companies, LLP and individuals.
So the clear cut winner is operating through a Company model which saves a person from huge tax burdens. Incorporation and Legal Compliance has reduced considerably and is easy to operate and also the cost of maintaining a Company is very economical.
Disclaimer: Before making any decisions do consult the experts. Author does not take any responsibility for misrepresentation or interpretation of act or rules. Neither the author nor the Company accepts any liability for the loss or damage of any kind arising out of information in this document or for any action taken in reliance there on.
