How Your Taxes Build India: A Beginner’s Guide to Income Tax
What is Income Tax?
Income tax is a portion of your earnings that you pay to the government to help fund public services like healthcare, infrastructure, and education. Think of it as your contribution to keeping the country running smoothly. Whether you’re a salaried employee, a freelancer, or a business owner, income tax affects everyone who earns beyond a certain threshold.
Who Needs to Pay Income Tax in India?
If you’re earning an income in India, here’s who falls under the tax bracket:
Salaried individuals
Self-employed professionals
Businesses
Anyone earning from rent, dividends, or capital gains
For youth, it’s important to know that even earnings from social media influencing or freelance gigs can be taxable if they cross the minimum exemption limit.
Tax Slabs in India
The tax you pay depends on how much you earn. Here’s a snapshot of the income tax slabs under the Old Tax Regime:
| Income Range (₹) | Tax Rate |
|---|---|
| 0 – 2,50,000 | Nil |
| 2,50,001 – 5,00,000 | 5% |
| 5,00,001 – 10,00,000 | 20% |
| Above 10,00,000 | 30% |
Old vs. New Tax Regime
In 2020, the government introduced a New Tax Regime to simplify taxes. Here’s a quick comparison:
| Key Features | Old Regime | New Regime |
| Deductions & Exemptions | Multiple available (e.g., 80C, 80D) | Minimal (e.g., NPS, EPF) |
| Tax Rates | Higher | Lower |
| Suitable for | Those with significant investments | Those without major deductions |
Simple Example:
Under the Old Regime, if you earn ₹9,00,000 and claim deductions of ₹1,50,000, your taxable income reduces to ₹7,50,000.
Under the New Regime, you’ll pay taxes on the full ₹9,00,000 but at lower rates.
How Much Does the Government Earn from Income Tax?
Income tax is a crucial revenue source for the Indian government. Here’s how much was collected in the last three years:
| Financial Year | Income Tax Revenue (₹ Crore) |
| 2020-21 | 4,69,000 |
| 2021-22 | 6,12,000 |
| 2022-23 | 7,36,000 |
This growing trend highlights the importance of income tax in funding the nation’s growth.
Why is Income Tax Important?
Public Services: Your taxes fund roads, schools, healthcare, and national security.
Economic Growth: Tax revenue supports infrastructure projects that boost jobs and development.
Social Welfare: Programs like MNREGA and subsidized healthcare are funded by taxes.
Tips for Young Taxpayers
Know Your Regime: Choose between Old and New based on your financial habits.
File Early: Avoid the last-minute rush to file your Income Tax Returns (ITR).
Claim Deductions: Make the most of exemptions like EPF, NPS, and health insurance.
Income tax may sound intimidating, but understanding it can help you save money and contribute to nation-building. Start early, stay informed, and make your taxes work for you!