Income Tax Slabs for Individuals below 60 years of age in FY 2020-21 (AY 2021-22) Income Tax Slab Tax Applicable as per New Regime Rs. 0 - Rs.2,50,000 Nil Rs. 2,50,001 - Rs. 5,00,000 5.00% Rs. 5,00,001 - Rs. 7,50,000 Rs.12500 + 10% of total income exceeding Rs. 5,00,000 Rs.7,50,001 - Rs. 10,00,000 Rs.37500 + 15% of total income exceeding Rs.7,50,000 Rs. 10,00,001 - Rs. 12,50,000 Rs.75000 + 20% of total income exceeding Rs. 10,00,000 Rs. 12,50,001 - Rs. 15,00,000 Rs.125000 + 25% of total income exceeding Rs. 12,50,000 Above Rs. 15,00,000 Rs.187500 + 30% of total income exceeding Rs. 15,00,000 1. The tax calculated on the basis of mentioned rates will be subject to health and education cess of 4% II. Any individual who wishes to go by the new slab rates FY 2020-21 onwards will not be able to avail of certain exemptions and deductions/ tax benefits. III. List of exemptions and deductions that won't be available are: Leave Travel Allowance (LTA) House Rent Allowance Conveyance Daily expenses in the course of employment Relocation allowance Helper allowance . Children education allowance . Other special allowance Section 10(14)] Standard deduction Professional tax Housing loan interest (Section 24) Deduction under Chapter VI-A (80C, 80D, 80E, and so on) (Except section 80CCD(2) - NPS contribution by the employer and 8OJJA) Income Tax Slabs for Individuals within 60 years of Age (FY - 2019-2020) Slabs for Taxable income Applicable Tax Rates & Cess Within Rs. 2.5 Lakh Nil From Rs. 2.5 Lakh to 5 lakh Taxable income's 5% plus 4% cess on tax 5% for taxable income between Rs. 2.5 Lakh and 5 Lakh + 20% on taxable income between Rs. 5 Lakh and 10 Lakh From Rs. 5 Lakh to 10 Lakh plus 4% cess on tax 5% for taxable income between Rs. 2.5 Lakh and 5 Lakh + 20% on taxable income between Rs. 5 Lakh and 10 Lakh Above Rs. 10 Lakh +30% on taxable income above Rs. 10 Lakh plus 4% cess on tax Understand this taxation structure with the help of this example, Mr. X, aged 40 years, has an annual income of Rs. 7 Lakh. The tax calculation for him will thus be as follows. Income tax on Rs. 2.5 Lakh @ Nil = Rs. O Income tax on Rs. 2.5 Lakh (Rs. 5 Lakh - Rs. 2.5 Lakh) @ 5% = Rs. 12,500 Income tax on Rs. 2 Lakh (Rs. 7 Lakh - Rs. 5 Lakh) @ 20% = Rs. 40,000 Total Income tax = Rs. 0 + Rs. 12,500 + Rs. 40,000 = Rs. 52,500 Plus cess @ 4% on Rs. 52,500 = Rs. 2,100 Total income Tax payable = Rs. 52,500 + Rs. 2,100 = Rs. 54,600 The Income Tax Act, 1961 also allows for deductions under sections 80(C) and 80(U) as applicable. In such cases, tax is calculated after taking into account such deductions, and cess added to arrive at the total tax payable. Now, with this understanding of what is income tax slab and how tax is calculated on this basis, have a look at the tax applicability for resident individuals in other age brackets. Henry and Tammy Olson reside at 4313 Coyote Lane, Fort Collins CO (80524) with their twelve-year-old daughter Linda (333-44-5555) and sons Steven (555-43-1212, age 19) and Jeremy (567-89-1234, age 15). Steven is a full-time student at CSU. Henry's social security number is 444-22-1010 and Tammy's is 987- 65-4321. Henry is self-employed, doing business as "Handy Hank's Service," and Tammy is a bank manager. Her W-2 shows salary of $57,998, federal income tax withholding of $4,385, and state income tax withholding of $2,540. The Olsons had interest income from Third National Bank of $334. Vail Mutual Fund reported income to them as follows: ordinary qualified dividends, $642; interest, $187; municipal bond interest, $1,412; capital gain distributions, $682. Etrade Brokerage reported that they sold 100 shares of ABC Corp. on October 6 for $4,682, and that they had purchased the shares on January 12, 2014 for $3,126. They received ordinary qualified dividends of $72 on this stock before they sold it. The Olsons have a short- term capital loss carryover of $389. The Olsons own two houses: the one on Coyote Lane in which they reside, and one at 529 Bronco Court in Fort Collins CO (80525), which they rent out and actively manage. Rent income was $17,300 for the Information about the two houses: Coyote Bronco Cost (Land) 60,000 40,000 Cost (Building) 256,000 196,000 Mortgage Interest 3,153 2,509 Property Tax 2,265 1,721 Insurance 822 1,105 Maintenance 1,525 1,830 Utilities 6,421 -O- Personal expenses for the Olsons include: cash charitable donations, $1,260; medical expenses, $2,272. Their estimated tax payments paid during 2019 were: federal, $6,000; state, $2,000. In 2019, they paid their state income tax balance due for 2018 of $425. Henry contributed $2,000 each to his traditional and Roth IRAs during the year. He has no other tax-favored retirement plan. Henry had gross income from his business of $89,794. His expenses include: Advertising $ 1,850 Equipment rental 2,140 Liability insurance 918 Legal and acct fees 1,360 Licenses and permits 922 Supplies 21,587 Telephone 1,332 Miscellaneous 466 During the year he bought small tools for $3,975. Henry put 51,220 miles on his business van during the year, for which he kept adequate records. He does not use the van for personal purposes. He operates out of an office in his home, which occupies 242 of the 3,025 square feet of the residence. Henry uses the cash method of accounting to maintain his business records, and does not have any inventory. He does not have any depreciable personalty. Required: Part 1: Prepare Schedule C and Schedule SE for Henry Olson, along with Form 8829, for 2019. Part 2: Prepare the 2019 federal income tax return for Henry and Tammy Olson. Attach all necessary forms and schedules in the proper order. You do not need to resubmit the forms and schedules from part 1. You do not need to submit Form 8949. You must attach a hand-written schedule showing your income tax calculation. Note: You will need to refer to the instructions for Form 1040 and the related schedules. IRS Publication 17 contains general information on preparing individual returns. Round all amounts to the nearest dollar, and do not enter zeroes unless called for. You may NOT use tax software on this project. Income Tax Slabs for Individuals below 60 years of age in FY 2020-21 (AY 2021-22) Income Tax Slab Tax Applicable as per New Regime Rs. 0 - Rs.2,50,000 Nil Rs. 2,50,001 - Rs. 5,00,000 5.00% Rs. 5,00,001 - Rs. 7,50,000 Rs.12500 + 10% of total income exceeding Rs. 5,00,000 Rs.7,50,001 - Rs. 10,00,000 Rs.37500 + 15% of total income exceeding Rs.7,50,000 Rs. 10,00,001 - Rs. 12,50,000 Rs.75000 + 20% of total income exceeding Rs. 10,00,000 Rs. 12,50,001 - Rs. 15,00,000 Rs.125000 + 25% of total income exceeding Rs. 12,50,000 Above Rs. 15,00,000 Rs.187500 + 30% of total income exceeding Rs. 15,00,000 1. The tax calculated on the basis of mentioned rates will be subject to health and education cess of 4% II. Any individual who wishes to go by the new slab rates FY 2020-21 onwards will not be able to avail of certain exemptions and deductions/ tax benefits. III. List of exemptions and deductions that won't be available are: Leave Travel Allowance (LTA) House Rent Allowance Conveyance Daily expenses in the course of employment Relocation allowance Helper allowance . Children education allowance . Other special allowance Section 10(14)] Standard deduction Professional tax Housing loan interest (Section 24) Deduction under Chapter VI-A (80C, 80D, 80E, and so on) (Except section 80CCD(2) - NPS contribution by the employer and 8OJJA) Income Tax Slabs for Individuals within 60 years of Age (FY - 2019-2020) Slabs for Taxable income Applicable Tax Rates & Cess Within Rs. 2.5 Lakh Nil From Rs. 2.5 Lakh to 5 lakh Taxable income's 5% plus 4% cess on tax 5% for taxable income between Rs. 2.5 Lakh and 5 Lakh + 20% on taxable income between Rs. 5 Lakh and 10 Lakh From Rs. 5 Lakh to 10 Lakh plus 4% cess on tax 5% for taxable income between Rs. 2.5 Lakh and 5 Lakh + 20% on taxable income between Rs. 5 Lakh and 10 Lakh Above Rs. 10 Lakh +30% on taxable income above Rs. 10 Lakh plus 4% cess on tax Understand this taxation structure with the help of this example, Mr. X, aged 40 years, has an annual income of Rs. 7 Lakh. The tax calculation for him will thus be as follows. Income tax on Rs. 2.5 Lakh @ Nil = Rs. O Income tax on Rs. 2.5 Lakh (Rs. 5 Lakh - Rs. 2.5 Lakh) @ 5% = Rs. 12,500 Income tax on Rs. 2 Lakh (Rs. 7 Lakh - Rs. 5 Lakh) @ 20% = Rs. 40,000 Total Income tax = Rs. 0 + Rs. 12,500 + Rs. 40,000 = Rs. 52,500 Plus cess @ 4% on Rs. 52,500 = Rs. 2,100 Total income Tax payable = Rs. 52,500 + Rs. 2,100 = Rs. 54,600 The Income Tax Act, 1961 also allows for deductions under sections 80(C) and 80(U) as applicable. In such cases, tax is calculated after taking into account such deductions, and cess added to arrive at the total tax payable. Now, with this understanding of what is income tax slab and how tax is calculated on this basis, have a look at the tax applicability for resident individuals in other age brackets. Henry and Tammy Olson reside at 4313 Coyote Lane, Fort Collins CO (80524) with their twelve-year-old daughter Linda (333-44-5555) and sons Steven (555-43-1212, age 19) and Jeremy (567-89-1234, age 15). Steven is a full-time student at CSU. Henry's social security number is 444-22-1010 and Tammy's is 987- 65-4321. Henry is self-employed, doing business as "Handy Hank's Service," and Tammy is a bank manager. Her W-2 shows salary of $57,998, federal income tax withholding of $4,385, and state income tax withholding of $2,540. The Olsons had interest income from Third National Bank of $334. Vail Mutual Fund reported income to them as follows: ordinary qualified dividends, $642; interest, $187; municipal bond interest, $1,412; capital gain distributions, $682. Etrade Brokerage reported that they sold 100 shares of ABC Corp. on October 6 for $4,682, and that they had purchased the shares on January 12, 2014 for $3,126. They received ordinary qualified dividends of $72 on this stock before they sold it. The Olsons have a short- term capital loss carryover of $389. The Olsons own two houses: the one on Coyote Lane in which they reside, and one at 529 Bronco Court in Fort Collins CO (80525), which they rent out and actively manage. Rent income was $17,300 for the Information about the two houses: Coyote Bronco Cost (Land) 60,000 40,000 Cost (Building) 256,000 196,000 Mortgage Interest 3,153 2,509 Property Tax 2,265 1,721 Insurance 822 1,105 Maintenance 1,525 1,830 Utilities 6,421 -O- Personal expenses for the Olsons include: cash charitable donations, $1,260; medical expenses, $2,272. Their estimated tax payments paid during 2019 were: federal, $6,000; state, $2,000. In 2019, they paid their state income tax balance due for 2018 of $425. Henry contributed $2,000 each to his traditional and Roth IRAs during the year. He has no other tax-favored retirement plan. Henry had gross income from his business of $89,794. His expenses include: Advertising $ 1,850 Equipment rental 2,140 Liability insurance 918 Legal and acct fees 1,360 Licenses and permits 922 Supplies 21,587 Telephone 1,332 Miscellaneous 466 During the year he bought small tools for $3,975. Henry put 51,220 miles on his business van during the year, for which he kept adequate records. He does not use the van for personal purposes. He operates out of an office in his home, which occupies 242 of the 3,025 square feet of the residence. Henry uses the cash method of accounting to maintain his business records, and does not have any inventory. He does not have any depreciable personalty. Required: Part 1: Prepare Schedule C and Schedule SE for Henry Olson, along with Form 8829, for 2019. Part 2: Prepare the 2019 federal income tax return for Henry and Tammy Olson. Attach all necessary forms and schedules in the proper order. You do not need to resubmit the forms and schedules from part 1. You do not need to submit Form 8949. You must attach a hand-written schedule showing your income tax calculation. Note: You will need to refer to the instructions for Form 1040 and the related schedules. IRS Publication 17 contains general information on preparing individual returns. Round all amounts to the nearest dollar, and do not enter zeroes unless called for. You may NOT use tax software on this project