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Income Tax Slab 2020-21 (AY 2021-22) — The Year the New Regime Launched

Updated: 3 June 2026

FY 2020-21 (AY 2021-22) was a landmark year in Indian income tax — Finance Act 2020 introduced the new tax regime with 7 slabs and lower rates but without deductions. Taxpayers could choose between the new regime and the old regime with all existing deductions.

FY 2020-21

Year the new tax regime was born (Finance Act 2020). New regime offered 7 slabs (0%–30%) at lower rates but no deductions. Old regime retained all deductions. Most salaried taxpayers stuck with the old regime that year.

FY 2020-21 Income Tax Slabs — New vs Old Regime

For Assessment Year 2021-22 (income earned in FY 2020-21), taxpayers had two options for the first time. The comparison below shows exactly how the two regimes differed:

Income Slab	New Regime FY 2020-21	Old Regime FY 2020-21
Up to ₹2,50,000	0%	0%
₹2,50,001 – ₹5,00,000	5%	5%
₹5,00,001 – ₹7,50,000	10%	20%
₹7,50,001 – ₹10,00,000	15%	20%
₹10,00,001 – ₹12,50,000	20%	30%
₹12,50,001 – ₹15,00,000	25%	30%
Above ₹15,00,000	30%	30%

Surcharge: 10% for income ₹50L–₹1Cr; 15% for ₹1Cr–₹2Cr; 25% for ₹2Cr–₹5Cr; 37% above ₹5Cr. Health & Education Cess: 4% on (tax + surcharge). These applied identically to both regimes.

Key Differences — New Regime vs Old Regime in FY 2020-21

Feature	New Regime (FY 2020-21)	Old Regime (FY 2020-21)
Standard deduction (₹50,000)	Not available	Available
Section 80C (up to ₹1.5L)	Not available	Available
HRA exemption	Not available	Available
LTA exemption	Not available	Available
Section 24(b) home loan interest (up to ₹2L)	Not available	Available
Section 80D (health insurance)	Not available	Available (₹25K–₹75K)
Section 87A rebate (up to ₹5L income)	Not available	Available (₹12,500 rebate)
NPS employer contribution 80CCD(2)	Available	Available
Number of tax slabs	7 slabs	4 slabs

How the New Tax Regime Has Evolved Since FY 2020-21

The new regime launched in FY 2020-21 was significantly enhanced in subsequent budgets to make it more attractive. Here's how the regime has changed over the years:

Feature	FY 2020-21 (Launch)	FY 2023-24 (Revised)	FY 2025-26 (Current)
Basic exemption limit	₹2.5 lakh	₹3 lakh	₹4 lakh
Zero-tax income (with rebate)	None (no 87A)	Up to ₹7 lakh	Up to ₹12 lakh
Standard deduction	Not allowed	₹50,000 (from FY 2023-24)	₹75,000
87A rebate	Not available	₹25,000 (up to ₹7L income)	₹60,000 (up to ₹12L income)
Default regime	Old regime	New regime (from FY 2023-24)	New regime
Number of slabs	7 slabs	6 slabs	6 slabs (revised)

Budget 2020 — Other Key Tax Changes for FY 2020-21

FY 2020-21 brought other significant changes beyond just the new regime introduction:

Dividend Taxation Overhauled: The Dividend Distribution Tax (DDT) paid by companies was abolished. From FY 2020-21, dividends became taxable in the hands of investors at their slab rate. TDS at 10% applies on dividends above ₹5,000 per company per year.
Employer contribution to EPF/NPS/Superannuation: Employer contributions exceeding ₹7.5 lakh per year in aggregate across EPF, NPS, and superannuation fund became taxable as a perquisite in the employee's hands — a new cap imposed from FY 2020-21.
TDS on rent: Section 194-IB threshold for TDS on rent by individuals/HUFs remained at ₹50,000 per month.

Frequently Asked Questions

When was the new tax regime introduced in India?

The new tax regime was introduced in the Union Budget 2020 (Finance Act 2020) and became effective from FY 2020-21 (Assessment Year 2021-22). It was presented by Finance Minister Nirmala Sitharaman on 1 February 2020. The new regime offered more tax slabs with lower rates but required taxpayers to forgo most deductions and exemptions like 80C, HRA, LTA, and standard deduction. Taxpayers were given a choice: opt for the new regime at lower rates without deductions, or stick with the old regime with all deductions available.

What were the income tax slabs under the new regime in FY 2020-21?

The new tax regime FY 2020-21 slabs were: 0% for income up to ₹2.5 lakh, 5% for ₹2.5L–₹5L, 10% for ₹5L–₹7.5L, 15% for ₹7.5L–₹10L, 20% for ₹10L–₹12.5L, 25% for ₹12.5L–₹15L, and 30% for income above ₹15 lakh. This was different from the old regime which had just 3 slabs: 0% up to ₹2.5L, 5% for ₹2.5L–₹5L, 20% for ₹5L–₹10L, and 30% above ₹10L. The new regime had more granular slabs with lower rates, but the benefit depended heavily on the level of deductions a taxpayer could claim under the old regime.

Was the Section 87A rebate available in the new tax regime for FY 2020-21?

No. When the new tax regime was first introduced for FY 2020-21, the Section 87A rebate of ₹12,500 (available to taxpayers with total income up to ₹5 lakh under the old regime) was NOT available under the new regime. This was a significant drawback — under the old regime, anyone earning up to ₹5L effectively paid zero tax due to the 87A rebate and standard deduction. Under the new regime in FY 2020-21, taxpayers with income between ₹2.5L–₹5L had to pay 5% tax without any rebate. This disparity was later addressed in subsequent budgets.

Why did most taxpayers choose the old regime in FY 2020-21?

Most salaried taxpayers found the old regime more beneficial in FY 2020-21 because the combined value of available deductions exceeded the tax savings from lower new-regime rates. The key deductions in the old regime included: ₹50,000 standard deduction, ₹1.5 lakh under Section 80C (PPF, ELSS, LIC), up to ₹2 lakh home loan interest under Section 24(b), HRA exemption (for those paying rent), and ₹25,000–₹50,000 health insurance premium under 80D. For a ₹15 lakh salary earner, if total deductions exceeded approximately ₹3.75 lakh, the old regime resulted in lower tax. Most urban salaried employees with home loans and investments easily crossed this threshold.

Current Tax Slabs 2025-26 New vs Old Regime Calculator 80C Deductions Tax Slab 2021-22 Standard Deduction Guide

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