Understanding the income tax slab rates for Assessment Year 2021‑22 is important for individuals and Hindu Undivided Families (HUFs) when planning finances. The Indian income tax system is structured in a progressive manner where tax liability increases with higher income. Under the Income Tax Act, 1961, individuals have the option to choose between two regimes: the old regime which allows various deductions and exemptions, and the new regime introduced under Section 115BAC, which offers reduced slab rates in exchange for giving up exemptions. Both residents and non‑residents are subject to these rules, but there are special provisions for senior citizens and super senior citizens.
Income Tax Slab Rates under the Old Regime
The old regime continues to be relevant because many taxpayers prefer it due to the wide availability of deductions such as those under Section 80C, 80D, and exemptions like House Rent Allowance and Leave Travel Allowance. The slabs are categorized based on the age of the taxpayer.
Individuals below 60 years of age
For a resident or non‑resident individual who has not yet reached 60 years of age, the following slab rates apply for AY 2021‑22:
- Income up to ₹2,50,000 is exempt.
- Income from ₹2,50,001 to ₹5,00,000 is taxed at 5 percent.
- Income from ₹5,00,001 to ₹10,00,000 is taxed at 20 percent.
- Income above ₹10,00,000 is taxed at 30 percent.
This means that an individual earning ₹8,00,000 under the old regime, after claiming eligible deductions, will be taxed at progressive rates starting from 5 percent and moving to 20 percent for the higher portion of income.
Resident senior citizens aged between 60 and 80 years
A person who is a resident and has attained the age of 60 years or more but is less than 80 years at any time during the previous year enjoys a higher exemption limit. The slab rates are:
- Income up to ₹3,00,000 is exempt.
- Income from ₹3,00,001 to ₹5,00,000 is taxed at 5 percent.
- Income from ₹5,00,001 to ₹10,00,000 is taxed at 20 percent.
- Income above ₹10,00,000 is taxed at 30 percent.
The benefit here is the higher basic exemption limit of ₹3,00,000 instead of ₹2,50,000. For example, a senior citizen with an income of ₹4,80,000 after deductions will pay only 5 percent tax on the portion above ₹3,00,000.
Resident super senior citizens aged 80 years or above
Residents who have attained the age of 80 years or more enjoy the highest basic exemption limit. The slab rates are:
- Income up to ₹5,00,000 is exempt.
- Income from ₹5,00,001 to ₹10,00,000 is taxed at 20 percent.
- Income above ₹10,00,000 is taxed at 30 percent.
This category provides significant relief since no tax is payable up to ₹5,00,000 of income. For example, a super senior citizen earning ₹6,50,000 after deductions will pay tax at 20 percent only on ₹1,50,000, resulting in lower tax liability compared to younger individuals.
Additional Provisions for Individuals under the Old Regime
Surcharge
In addition to income tax, individuals are also required to pay a surcharge if their total income crosses certain thresholds. The surcharge is calculated on the amount of income tax and not on the income itself. The applicable rates are:
- 10 percent of income tax if total income exceeds ₹50 lakh.
- 15 percent if total income exceeds ₹1 crore.
- 25 percent if total income exceeds ₹2 crore.
- 37 percent if total income exceeds ₹5 crore.
This progressive surcharge ensures that very high‑income earners contribute a larger share to revenue. For example, if an individual’s total income is ₹1.2 crore, the income tax will first be calculated according to slab rates and then a 15 percent surcharge will be added on that tax amount.
Health and Education Cess
After income tax and surcharge are computed, a health and education cess of 4 percent is levied on the total of these amounts. This cess is applied uniformly across all categories of taxpayers and is used for funding education and health initiatives.
Rebate under Section 87A
To provide relief to small taxpayers, a resident individual with total income not exceeding ₹5,00,000 is eligible for rebate under Section 87A. The rebate is equal to 100 percent of income tax payable or ₹12,500, whichever is lower. This essentially means that any resident individual with income up to ₹5,00,000 has no tax liability after availing this rebate. For instance, if a 35‑year‑old resident has an income of ₹4,90,000 after deductions, the tax payable would normally be ₹12,000 but the rebate reduces it to zero.
Income Tax for HUFs, AOPs, BOIs, and Other Entities under Old Regime
The slab structure for Hindu Undivided Families, Associations of Persons, Bodies of Individuals, and Artificial Juridical Persons is the same as that applicable to individuals below 60 years of age. This means:
- Income up to ₹2,50,000 is exempt.
- Income from ₹2,50,001 to ₹5,00,000 is taxed at 5 percent.
- Income from ₹5,00,001 to ₹10,00,000 is taxed at 20 percent.
- Income above ₹10,00,000 is taxed at 30 percent.
Surcharge and cess are applied in the same way as for individuals.
For example, if a HUF earns ₹15,00,000 as net taxable income, the tax will be calculated in slabs, followed by surcharge if applicable, and then cess. This treatment ensures consistency across similar types of entities.
Introduction of the New Tax Regime under Section 115BAC
The Finance Act, 2020 introduced an optional regime under Section 115BAC that taxpayers can choose instead of the old system. The new regime offers reduced slab rates but comes with the condition that the assessee must forgo most exemptions and deductions such as House Rent Allowance, Leave Travel Allowance, deduction under Section 80C, 80D, and others. The intent behind this system was to simplify compliance and provide an alternative to those who do not claim many deductions.
Income Slabs under the New Regime
The following slab rates apply to individuals and HUFs under Section 115BAC for AY 2021‑22:
- Income up to ₹2,50,000 is exempt.
- Income from ₹2,50,001 to ₹5,00,000 is taxed at 5 percent.
- Income from ₹5,00,001 to ₹7,50,000 is taxed at 10 percent.
- Income from ₹7,50,001 to ₹10,00,000 is taxed at 15 percent.
- Income from ₹10,00,001 to ₹12,50,000 is taxed at 20 percent.
- Income from ₹12,50,001 to ₹15,00,000 is taxed at 25 percent.
- Income above ₹15,00,000 is taxed at 30 percent.
The lower rates across different ranges make the new regime attractive for taxpayers who do not claim large deductions. For example, an individual earning ₹9,00,000 without any major deductions may find that the new regime results in a lower tax outflow compared to the old regime.
Surcharge and Cess under the New Regime
The surcharge and cess provisions under the new regime remain the same as those under the old regime. The surcharge is levied based on the income thresholds of ₹50 lakh, ₹1 crore, ₹2 crore, and ₹5 crore, and the health and education cess of 4 percent continues to apply.
Important Considerations for Choosing the New Regime
While the new regime offers simplicity, the choice depends on individual circumstances. For taxpayers who claim significant deductions under sections like 80C for provident fund investments, 80D for health insurance, or exemptions like HRA, the old regime might be more beneficial. On the other hand, those with limited deductions or simpler income structures may benefit from lower slab rates under Section 115BAC.
Illustrative Examples of Tax Calculation
Example 1: Individual below 60 years under the old regime
Suppose an individual aged 35 has a gross income of ₹8,50,000 and claims deductions of ₹1,50,000 under Section 80C and ₹25,000 under Section 80D. The net taxable income is ₹6,75,000. Under the old regime, the tax is calculated as:
- Up to ₹2,50,000: Nil
- ₹2,50,001 to ₹5,00,000 (₹2,50,000): 5% = ₹12,500
- ₹5,00,001 to ₹6,75,000 (₹1,75,000): 20% = ₹35,000
- Total tax before cess = ₹47,500
- Health and education cess @4% = ₹1,900
- Total tax = ₹49,400
This shows how deductions reduce taxable income significantly in the old regime.
Example 2: Same individual under the new regime
If the same person opts for the new regime, deductions under Section 80C and 80D cannot be claimed. Tax will be calculated on ₹8,50,000 directly:
- Up to ₹2,50,000: Nil
- ₹2,50,001 to ₹5,00,000 (₹2,50,000): 5% = ₹12,500
- ₹5,00,001 to ₹7,50,000 (₹2,50,000): 10% = ₹25,000
- ₹7,50,001 to ₹8,50,000 (₹1,00,000): 15% = ₹15,000
- Total tax before cess = ₹52,500
- Health and education cess @4% = ₹2,100
- Total tax = ₹54,600
In this scenario, the old regime turns out to be better due to the deductions available.
Example 3: Super senior citizen under old regime
A super senior citizen with taxable income of ₹6,00,000 after deductions will pay tax as follows:
- Up to ₹5,00,000: Nil
- ₹5,00,001 to ₹6,00,000 (₹1,00,000): 20% = ₹20,000
- Cess @4% = ₹800
- Total tax = ₹20,800
This is much lower compared to what a younger taxpayer would pay on the same income.
Example 4: Individual with income of ₹4,80,000
A resident individual below 60 years with net income of ₹4,80,000 will fall under the rebate u/s 87A. The tax calculation is:
- Up to ₹2,50,000: Nil
- ₹2,50,001 to ₹4,80,000 (₹2,30,000): 5% = ₹11,500
- Tax before cess = ₹11,500
- Rebate under Section 87A = ₹11,500
- Final tax payable = Nil
This illustrates how the rebate ensures no tax liability for incomes up to ₹5,00,000.
Taxation of Partnership Firms including LLPs
Partnership firms and LLPs are treated as separate taxable entities under the Income Tax Act, which means that the profits of the firm are taxed at the firm level before distribution to partners. Partners are not taxed again on the share of profit received from the firm, as that portion is exempt in their hands. However, remuneration and interest received by partners are taxed as business income in their personal assessments.
Flat Tax Rate for Firms
For Assessment Year 2021‑22, partnership firms including LLPs are taxed at a flat rate of 30 percent. Unlike individuals, there are no progressive slabs applicable to firms. Regardless of whether the income is ₹2 lakh or ₹20 crore, the same base rate of 30 percent applies.
For example, if a partnership firm earns taxable income of ₹25,00,000, the tax before surcharge and cess will be ₹7,50,000 at 30 percent.
Surcharge on Firms
A surcharge of 12 percent is levied on the amount of income tax if the total income of the firm exceeds ₹1 crore. This surcharge is applied only on the tax, not on the income. For instance, if a firm earns ₹1.5 crore as taxable income, the tax at 30 percent is ₹45,00,000. Since the income exceeds ₹1 crore, a 12 percent surcharge of ₹5,40,000 will apply, making the tax plus surcharge ₹50,40,000 before cess.
Health and Education Cess
On the total of income tax and surcharge, a health and education cess of 4 percent is added. Using the previous example, cess would be ₹2,01,600, leading to a final tax liability of ₹52,41,600.
Effective Tax Rates for Firms
By combining income tax, surcharge, and cess, the effective tax liability for firms is:
- If income does not exceed ₹1 crore: 30 percent plus 4 percent cess, leading to an effective rate of 31.2 percent.
- If income exceeds ₹1 crore: 30 percent plus 12 percent surcharge plus 4 percent cess, leading to an effective rate of approximately 34.944 percent.
Minimum Alternate Tax for Firms
While MAT is primarily applicable to companies, firms are not subject to Minimum Alternate Tax. They are instead liable to Alternate Minimum Tax under Section 115JC in certain cases where they claim profit‑linked deductions. However, for most regular partnership firms and LLPs, the flat 30 percent rule remains the benchmark for computation.
Taxation of Domestic Companies
Domestic companies are those registered in India under the Companies Act or any other law in force. They are taxed under different provisions depending on turnover, nature of business, or choice of special concessional regimes. The government has introduced multiple options to encourage investment and manufacturing.
General Tax Rate for Domestic Companies
The general rate for domestic companies is 30 percent. This applies to companies that do not qualify for or do not opt for concessional schemes.
Reduced Rate for Small Companies
A reduced tax rate of 25 percent applies to domestic companies whose turnover in the financial year 2017‑18 does not exceed ₹400 crore. This provision was designed to provide relief to small and medium enterprises and encourage growth in that segment.
For example, a company with taxable income of ₹50 crore and turnover of ₹350 crore in FY 2017‑18 will be taxed at 25 percent instead of 30 percent. The tax before surcharge and cess would be ₹12.5 crore.
Companies Opting for Section 115BA
Section 115BA was introduced for manufacturing companies set up and registered on or after 1 March 2016. Such companies can opt to pay tax at 25 percent provided they do not claim certain deductions and incentives. While newer provisions have overshadowed Section 115BA, it remains available for eligible companies.
Companies Opting for Section 115BAA
The Finance Act, 2019 introduced Section 115BAA to encourage companies to pay lower tax by foregoing deductions. Under this section, domestic companies can opt to be taxed at 22 percent if they do not claim specified deductions such as those under Section 10AA, additional depreciation, or profit‑linked deductions. This regime is optional and once exercised cannot be withdrawn.
For example, a company with taxable income of ₹20 crore opting for Section 115BAA will pay 22 percent tax, amounting to ₹4.4 crore, plus surcharge and cess.
Companies Opting for Section 115BAB
To promote manufacturing, Section 115BAB offers the lowest tax rate of 15 percent to new domestic manufacturing companies set up and registered on or after 1 October 2019 and commencing manufacturing on or before 31 March 2023. These companies must also not claim specified deductions. This concessional rate has been introduced to position India as a global manufacturing hub.
For instance, a newly incorporated manufacturing company with taxable income of ₹50 crore can pay tax of ₹7.5 crore at 15 percent, subject to surcharge and cess.
Minimum Alternate Tax for Companies
Companies that opt for Section 115BAA or Section 115BAB are exempt from Minimum Alternate Tax (MAT). For other domestic companies, MAT is levied at 15 percent of book profits under Section 115JB, ensuring that companies with low taxable income due to exemptions still pay a minimum tax.
Surcharge on Domestic Companies
The surcharge structure for domestic companies is as follows:
- If total income exceeds ₹1 crore but does not exceed ₹10 crore: 7 percent of income tax.
- If total income exceeds ₹10 crore: 12 percent of income tax.
The surcharge increases the overall burden for larger companies.
Cess on Domestic Companies
A uniform health and education cess of 4 percent applies to all domestic companies on the tax plus surcharge.
Effective Tax Rates for Domestic Companies
The effective tax liability varies depending on the chosen scheme:
- Normal domestic company: Effective rate about 31.2 percent (without surcharge) or 33.38 percent (with 7 percent surcharge) or 34.94 percent (with 12 percent surcharge).
- Company under Section 115BAA: Effective rate about 25.17 percent including surcharge and cess.
- Company under Section 115BAB: Effective rate about 17.16 percent including surcharge and cess.
These rates illustrate how opting for concessional provisions can substantially reduce tax outflow.
Taxation of Foreign Companies
Foreign companies are taxed differently compared to domestic companies. A foreign company is one that is not registered in India and has its place of management outside India.
Flat Tax Rate for Foreign Companies
Foreign companies are taxed at a flat rate of 40 percent on income earned in India. There are no progressive slabs, making their base liability higher than domestic companies.
Surcharge on Foreign Companies
The surcharge for foreign companies is applied as follows:
- If income exceeds ₹1 crore but does not exceed ₹10 crore: 2 percent of income tax.
- If income exceeds ₹10 crore: 5 percent of income tax.
This lower surcharge compared to domestic companies is balanced by their higher base tax rate of 40 percent.
Cess on Foreign Companies
A 4 percent health and education cess is levied on the tax plus surcharge.
Effective Tax Rates for Foreign Companies
The effective rate for foreign companies is approximately 41.6 percent without surcharge. For those with income exceeding ₹10 crore, the rate can reach around 43.68 percent after adding surcharge and cess. This ensures that foreign companies pay a significant share of tax on income earned from operations in India.
Comparative Analysis of Firms and Companies
While partnership firms and LLPs are taxed at a flat 30 percent, domestic companies have access to multiple concessional regimes that can lower the tax burden substantially. For instance, a company under Section 115BAB pays an effective rate of about 17.16 percent, which is much lower than the effective 31.2 percent for an LLP. This makes incorporation of a company more attractive for certain businesses, especially in manufacturing.
On the other hand, LLPs are simpler in terms of compliance, not subject to MAT in general, and partners enjoy limited liability. Thus, the choice between LLP and company depends not only on tax but also on regulatory, operational, and strategic factors.
Foreign companies, due to their higher flat rate, face greater tax liability compared to domestic firms and companies. This is partly mitigated by Double Taxation Avoidance Agreements (DTAAs), which allow relief on certain income such as dividends, royalties, and fees for technical services.
Illustrative Examples of Tax Computation
Example 1: Partnership firm with income of ₹80,00,000
- Tax at 30 percent = ₹24,00,000
- Surcharge not applicable as income < ₹1 crore
- Cess @4% = ₹96,000
- Total tax = ₹24,96,000
Example 2: Partnership firm with income of ₹2,00,00,000
- Tax at 30 percent = ₹60,00,000
- Surcharge @12% = ₹7,20,000
- Subtotal = ₹67,20,000
- Cess @4% = ₹2,68,800
- Total tax = ₹69,88,800
Example 3: Domestic company with income of ₹8,00,00,000, turnover in FY 2017‑18 below ₹400 crore
- Tax at 25 percent = ₹2,00,00,000
- Income between ₹1 crore and ₹10 crore, surcharge @7% = ₹14,00,000
- Subtotal = ₹2,14,00,000
- Cess @4% = ₹8,56,000
- Total tax = ₹2,22,56,000
Example 4: Manufacturing company under Section 115BAB with income of ₹10,00,00,000
- Tax at 15 percent = ₹1,50,00,000
- Surcharge @10% (fixed under 115BAB) = ₹15,00,000
- Subtotal = ₹1,65,00,000
- Cess @4% = ₹6,60,000
- Total tax = ₹1,71,60,000
Example 5: Foreign company with income of ₹15,00,00,000
- Tax at 40 percent = ₹6,00,00,000
- Surcharge @5% = ₹30,00,000
- Subtotal = ₹6,30,00,000
- Cess @4% = ₹25,20,000
- Total tax = ₹6,55,20,000
Taxation of Co‑operative Societies
Co‑operative societies play a vital role in India’s socio‑economic framework by pooling resources of members and redistributing benefits for collective growth. Their taxation framework is distinct from companies and individuals, with slab‑based rates under the old regime and concessional flat rates under new provisions.
Old Regime Tax Slabs for Co‑operative Societies
For Assessment Year 2021‑22, the old regime for co‑operative societies specifies slab‑based taxation rather than a flat rate. The applicable slabs are:
- Up to ₹10,000 of taxable income: 10 percent
- From ₹10,001 to ₹20,000 of taxable income: 20 percent
- Above ₹20,000 of taxable income: 30 percent
This means that very small co‑operatives enjoy a relatively lower burden, but as income rises beyond ₹20,000, the highest rate of 30 percent applies on that portion of income.
Example of Computation under Old Regime
Suppose a co‑operative society earns a taxable income of ₹1,50,000. The tax calculation would be:
- First ₹10,000 taxed at 10% = ₹1,000
- Next ₹10,000 taxed at 20% = ₹2,000
- Balance ₹1,30,000 taxed at 30% = ₹39,000
- Total income tax = ₹42,000
After income tax, surcharge and cess will apply where applicable.
Surcharge on Co‑operative Societies
A surcharge of 12 percent of income tax is levied if the total income of the co‑operative society exceeds ₹1 crore. This is a significant addition for larger societies, particularly those engaged in banking or large‑scale commercial operations.
Health and Education Cess
As with other entities, a 4 percent health and education cess applies on the aggregate of income tax and surcharge.
Effective Rates under Old Regime
- If income is up to ₹1 crore, the effective rate will range between 10.4 percent to 31.2 percent depending on the slab.
- If income exceeds ₹1 crore, the surcharge pushes the effective tax rate higher, approximately 34.94 percent after cess.
New Regime for Co‑operative Societies under Section 115BAD
In the Union Budget 2020, Section 115BAD was introduced to provide co‑operative societies with the option of paying a concessional flat rate of 22 percent, provided they forgo specified deductions and exemptions. The key features are:
- Flat 22 percent tax on total income.
- A surcharge of 10 percent of income tax.
- Health and education cess at 4 percent of tax plus surcharge.
- No eligibility for certain deductions under Chapter VI‑A and other sections such as additional depreciation or profit‑linked incentives.
This option allows co‑operatives with large incomes to significantly reduce their tax liability compared to the old slab‑based system.
Example of Computation under Section 115BAD
If a co‑operative society has a taxable income of ₹2 crore:
- Tax at 22% = ₹44,00,000
- Surcharge @10% = ₹4,40,000
- Subtotal = ₹48,40,000
- Cess @4% = ₹1,93,600
- Total tax liability = ₹50,33,600
If the same income were taxed under the old regime, the base tax at 30 percent would be ₹60,00,000 plus surcharge and cess, leading to a much higher liability.
Comparison between Old and New Regimes
The choice between old and new regimes depends on whether the co‑operative society claims substantial deductions. Societies that benefit from deductions for certain income streams, such as those linked to agricultural activities, housing, or rural development, may find the old regime more beneficial. On the other hand, co‑operatives with high taxable income and fewer deductions can save considerably by opting for Section 115BAD.
Taxation of Local Authorities
Local authorities include municipal corporations, municipalities, panchayats, district boards, and other bodies constituted under law for administration of local areas. While they carry out public functions, their income from certain activities is subject to tax under the Income Tax Act.
Flat Tax Rate for Local Authorities
Local authorities are taxed at a flat rate of 30 percent on their taxable income. Unlike individuals or co-operative societies, there is no progressive slab system. This simplifies computation but imposes a significant tax burden even for smaller authorities with limited income streams.
Surcharge on Local Authorities
A surcharge of 12 percent of income tax is levied if the income of the local authority exceeds ₹1 crore. This provision primarily affects large municipal corporations and other urban local bodies that generate substantial revenue from property tax, licensing fees, and commercial activities.
Health and Education Cess
A 4 percent cess is applied on the total of income tax and surcharge, aligning with the general framework applicable to other taxpayers.
Example of Tax Computation for a Local Authority
If a municipal corporation earns taxable income of ₹5 crore:
- Tax at 30% = ₹1,50,00,000
- Surcharge @12% = ₹18,00,000
- Subtotal = ₹1,68,00,000
- Cess @4% = ₹6,72,000
- Total liability = ₹1,74,72,000
This illustrates the heavy burden placed on large local authorities under the current taxation framework.
Comparative Perspective on Co‑operatives and Local Authorities
Though both categories are taxed separately under the Income Tax Act, there are certain similarities and distinctions worth noting:
- Co‑operative societies under the old regime have slab‑based rates, while local authorities have a flat rate.
- Both entities face a surcharge of 12 percent when income exceeds ₹1 crore.
- Both are liable for a 4 percent health and education cess.
- Co‑operatives have the option to adopt the new 22 percent flat tax regime under Section 115BAD, while local authorities do not have an equivalent concessional scheme.
- Local authorities’ taxation is often criticized because they primarily perform public welfare and governance functions, yet they face commercial tax obligations similar to private entities.
Broader Context: Impact on Economic Sectors
Role of Co‑operative Societies in India
Co‑operative societies have been instrumental in supporting agriculture, rural credit, housing, and small‑scale industries. By pooling member resources, they reduce dependency on private lenders and intermediaries. For example, primary agricultural credit societies provide short‑term and medium‑term loans to farmers. Housing co‑operatives assist middle‑class and lower‑income groups in accessing affordable housing. Producer co‑operatives help small manufacturers market their goods more efficiently.
The taxation framework directly influences their capacity to reinvest in member welfare. A higher tax burden reduces surplus funds available for lending, infrastructure, and community development. Therefore, the introduction of Section 115BAD has been welcomed as a relief measure for larger societies with taxable surpluses.
Role of Local Authorities
Local authorities are the backbone of urban and rural governance. They raise revenue through property taxes, market fees, licensing, and user charges. These funds are used to maintain public utilities such as water supply, sanitation, roads, and community infrastructure.
However, when these bodies are taxed at corporate‑level rates, their resources for development projects shrink. The debate continues on whether local authorities should be given more exemptions, considering their non‑profit‑oriented nature. Some argue that only commercial income unrelated to governance functions should be taxed, while statutory collections for public welfare should remain exempt.
Illustrative Scenarios
Scenario 1: Small Co‑operative Credit Society
A credit co‑operative earns taxable income of ₹18,000. Under the old regime:
- First ₹10,000 taxed at 10% = ₹1,000
- Balance ₹8,000 taxed at 20% = ₹1,600
- Total tax before cess = ₹2,600
- Cess @4% = ₹104
- Final tax liability = ₹2,704
The burden is relatively small, allowing most of the surplus to remain within the society for lending activities.
Scenario 2: Large Co‑operative under Old Regime
A co‑operative with taxable income of ₹5 crore under the old regime:
- Entire taxable income above ₹20,000 taxed at 30% = ₹1,49,99,400
- Surcharge @12% = ₹17,99,928
- Subtotal = ₹1,67,99,328
- Cess @4% = ₹6,71,973
- Total liability = ₹1,74,71,301
Scenario 3: Same Co‑operative under Section 115BAD
For the same ₹5 crore taxable income:
- Tax @22% = ₹1,10,00,000
- Surcharge @10% = ₹11,00,000
- Subtotal = ₹1,21,00,000
- Cess @4% = ₹4,84,000
- Total liability = ₹1,25,84,000
By opting for Section 115BAD, the co‑operative saves nearly ₹49 lakh in taxes compared to the old regime.
Scenario 4: Local Authority with ₹50 lakh income
- Tax @30% = ₹15,00,000
- No surcharge since income < ₹1 crore
- Cess @4% = ₹60,000
- Total liability = ₹15,60,000
For smaller authorities, the flat rate system still imposes a relatively heavy burden compared to individuals or societies with equivalent incomes.
Policy Considerations
The taxation framework for co‑operatives and local authorities reflects the balance between ensuring government revenue and supporting community‑oriented institutions. Policymakers face several questions:
- Should local authorities be exempted entirely from income tax given their governance role?
- Should co-operative societies with small surpluses be given higher exemption thresholds to promote rural development?
- Does the concessional regime under Section 115BAD adequately address the challenges faced by large co‑operatives, especially in banking?
- How can tax policy better align with national objectives of financial inclusion, housing access, and agricultural sustainability?
Conclusion
The income tax structure for Assessment Year 2021‑22 reflects the complexity of India’s fiscal framework, where different categories of taxpayers are governed by distinct rates, surcharges, cess, and compliance requirements. Individuals are provided with progressive slab rates, differentiated further by age, while they may also choose between the old regime with deductions and exemptions and the new simplified regime with concessional rates under Section 115BAC. The inclusion of senior and super senior categories reflects a policy of easing the burden on older citizens, while rebates such as Section 87A ensure relief for those at lower income levels.
For Hindu Undivided Families, associations of persons, and artificial juridical persons, the old regime rates mirror those applicable to individuals below sixty years of age, creating parity in treatment. Partnership firms and LLPs face a flat 30 percent tax rate, with surcharges and cess raising the effective liability for larger incomes. Companies are provided with multiple options under Sections 115BA, 115BAA, and 115BAB, encouraging them to adopt lower concessional rates in exchange for surrendering deductions and exemptions. The framework also recognizes global competition by granting foreign companies a clear, albeit higher, flat tax rate of 40 percent, adjusted with surcharges based on income thresholds.
Co‑operative societies and local authorities, two categories deeply linked to community welfare and governance, face their own unique structures. Societies are given slab‑based taxation under the old regime but may also opt for the new 22 percent concessional flat tax regime under Section 115BAD. Local authorities, however, are taxed at a flat 30 percent rate without concessional options, raising questions about whether taxation should apply so heavily to entities performing governance and welfare functions.
The wider picture shows that income tax policy in India balances two objectives: revenue mobilization for national development and the encouragement of certain forms of economic activity through concessional regimes. By introducing optional tax regimes for individuals, companies, and co‑operatives, the law provides flexibility to taxpayers while aligning incentives with government priorities. At the same time, surcharges and cess ensure that high‑income earners and large institutions contribute more proportionately to the exchequer.
Overall, the framework for AY 2021‑22 reflects an evolving tax landscape that seeks to modernize compliance, reduce dependence on exemptions, and simplify the tax code while maintaining equity. For taxpayers, the challenge lies in carefully evaluating income profiles, available deductions, and future planning needs before choosing between regimes. For policymakers, the task remains to refine these provisions so that taxation remains fair, growth‑oriented, and aligned with broader social and economic goals.