What is a tax bracket and how does it affect my taxes?

In India, a tax bracket is a range of income levels that are subject to a specific income tax rate. Tax brackets are used to determine how much income tax you owe to the government based on your taxable income.

For the financial year 202122, there are four tax brackets in India, each with a different tax rate:

1. Up to Rs. 2.5 lakh: No tax
2. Rs. 2.5 lakh to Rs. 5 lakh: 5% tax
3. Rs. 5 lakh to Rs. 10 lakh: 20% tax
4. Above Rs. 10 lakh: 30% tax

When you file your income tax return, your income is assessed and taxed at the rate applicable to your income bracket. If your income falls into a higher tax bracket, you will have to pay a higher percentage of your income as tax. It is important to note that tax brackets are marginal, which means that only the income that falls within that bracket is taxed at that particular rate, not your entire income.

Understanding your tax bracket can help you plan your finances better and take steps to reduce your taxable income if necessary.