Tax threshold

A tax threshold represents the minimum amount of income, wealth, turnover, or other measurable indicator at which a particular tax begins to apply. If an individual or business remains below this limit, the corresponding tax does not arise. Each tax type—whether income tax, wealth-based levies, or consumption taxes like GST/VAT—usually sets its own threshold criteria.

Example:

Income Tax Illustration:
Suppose the basic exemption limit for an individual is ₹3,00,000. Income up to this figure attracts no tax. If the individual earns ₹3,50,000, only the ₹50,000 above the exemption level would be subject to tax.

GST Illustration:
For suppliers of goods, GST registration becomes compulsory once annual turnover exceeds ₹40 lakh. A shop earning ₹35 lakh in a year would not need to register, but if its turnover rises to ₹42 lakh, GST registration and compliance would then be required.