Tax rates are an integral aspect of any country's financial policy, influencing individuals, businesses, and the economy at large.

In this blog, we delve into the concept of tax rates, exploring their significance, how they are determined, and their impact on taxpayers. We'll also analyse current statistics and diverse perspectives to provide a well-rounded understanding.

What are Tax Rates?

Tax rates refer to the percentage at which individuals or entities are taxed on their income or profits by the government. These rates vary based on category of taxpayer, income levels, types of income, residential status, etc. In India, the rates of income-tax are prescribed by the Finance Act every year, except where the special tax rates are prescribed under the relevant provisions of the Income-tax Act. such as-

• The short term capital gain from the sale of listed equity shares is charged at a rate of 15% under Section 111A and the long term capital gain from the sale of listed equity shares is charged at a rate of 10% under Section 112A .
• Long term capital gains from certain other capital assets are charged at a rate of 20% under Section 112.
• Income from unexplained investments, etc., is charged at a rate of 60% under Section 115 BBE .
• Tax rates under the new tax regime have been prescribed under Section 115-BAC of the Income-tax Act.

Tax Rates for Individual

Subject to the special tax rates, the tax rates prescribed for individuals in respect of Assessment Year 2024–25 (for which the returns are due) under the Old Tax Regime and the New Tax Regime are given as under

Tax Rates under the Old Tax Regime :

Individuals other than the resident senior citizen

Resident Senior Citizen ( 60 Years to 79 years)

Resident Senior Citizen ( 80 Years and above)

Tax rates under the New Tax Regime:

Tax rates listed above are subject to applicable surcharges and cess.

Also read Old vs. New Tax Rules: What's Best for You in 2024?

Impact of Tax Rates:

Tax rates directly affect the disposable income, savings, and consumption patterns of an Individual. Higher tax rates can reduce incentives to work, save, and invest, while lower rates may stimulate economic activity.

Diverse Perspectives:

Opinions on tax rates vary widely, with proponents arguing for progressive taxation to reduce income inequality and fund public services. Conversely, critics advocate for lower tax rates to stimulate economic growth, promote entrepreneurship, and incentivize innovation.

Conclusion

Getting a good handle on the complicated tax system requires both individuals and businesses to understand tax rates. By considering diverse perspectives and analysing current statistics, we can gain insights into the role of tax rates in shaping economic policy and driving sustainable development.

[Disclaimer- The article is only for educational purposes and is not to be construed as tax advice. The relevant provisions of the Income-tax Act may be referred to, for complete understanding.]