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2. Tax structure and tax slabs
Generally, income tax systems are progressive, meaning a high income earner has to pay a higher rate. Tax systems vary from country to country; however, often tax systems contain numerous tax slabs or brackets in them. In most of the countries, the individual is categorized under a specific tax bracket according to his annual income. For each slab, the rate is different.
Example: Individual taxpayer slabs in India
• Basic exemption limit: This is the most basic amount that appears to be of income, say INR 2.5 lakhs. This is completely exempt from tax.
• Income Tax Slabs
o 5% between INR 2.5 lakhs to INR 5 lakhs
o 10%, 15%, 20% and so on. The top one is 30% for the highest income brackets.