What is the Income tax slab?
The taxpayers in India need to pay income tax based on the income tax slab they fall in. The Income tax slab consists of different ranges of income with different tax rates. As income increases, the tax rates also increase. The slab system was introduced to enable a fair tax system in the country. The changes in the income tax slab are done as per the budget announcement. There are three categories under which income tax is divided:-
- Individuals who are less than 60 years
- Senior citizens with age of 60 to 80 years
- Super senior citizens with an age of above 80 years.
New Income Tax Slabs For FY 2023-24 (AY 2024-25)
As per the Union Budget 2023, a few key changes have been introduced under the new tax regime. The tax slab under the new tax regime has been reduced from 6 to 5, and the basic exemption limit has been raised to Rs. 3 lakh from Rs. 2.5 lakh. These changes will be applicable from 1 April 2023. The slab structure has been revised:-
Income Tax Slab Rate for New Tax Regime
| Range of Income (Rs.) |
Tax Rate |
| Upto 3,00,000 |
Nil |
| 3,00,000-6,00,000 |
5% |
| 6,00,000-9,00,000 |
10% |
| 9,00,000-12,00,000 |
15% |
| 12,00,000-15,00,000 |
20% |
| Above 15,00,000 |
30% |
Income Tax Slab Rate for Old Tax Regime
| Range of Income (Rs.) |
Tax Rate |
| Up to 2,50,000 |
Nil |
| 2,50,000-5,00,000 |
5% |
| 5,00,000-10,00,000 |
20% |
| Above 10,00,000 |
30% |
Old Tax Regime Vs. New Tax Regime
A lot of confusion has arisen after Budget 2023 as it has brought many amendments under the new tax regime. This time, the government focused on a new tax regime, making it more attractive for the taxpayers. But with several deductions, the old tax regime has always been the first choice for taxpayers. Let us talk in detail about both these regimes and check which will suit you best.
New Tax Regime
The new tax regime was introduced in Budget 2020, effective April 1, 2020. The new regime offers lower tax rates for higher incomes than the old tax regime. It allows you to lower your tax liability subject to certain conditions and is optional.
So, If you choose to calculate your taxes using the new tax regime, most of the deductions and exemptions available under the Income Tax Act 1961 would not be available to you. However, with the budget 2023, the government offered a few key changes in the new tax regime to make it more attractive:-
- The new income tax regime will be set as the default option. The basic exemption limit has been raised to Rs 3 lakh from Rs 2.5 lakh to make the new tax regime more attractive. Also, the highest tax rate of 30% will be levied above Rs 15 lakh income.
- In the 2023-24 budget announcement, the rebate under Section 87A has been hiked to Rs. 25000 for taxable income up to Rs. 7 lakhs under the new tax regime.
- The proposal to introduce the standard deduction in the new tax regime has been shared. As per this salaried class, the pensioners, including family pensioners, will benefit from a standard deduction of Rs. 50,000/-
- Also, the exemption of a family pension of Rs. 15,000 has been introduced under the new tax regime.
- Reduction in the surcharge on annual income above Rs 5 crore from 37% to 25% under the new regime. Currently, the highest tax rate is 42.74%, which would slash the maximum tax rate to 39% after this reduction.
- The limit of Rs. 3 lakh for tax exemption on leave encashment on non-government salaried employees has been raised to Rs. 25 lakh.
Old Tax Regime
The old tax regime in India refers to the system of income tax calculation and slabs that existed before the introduction of the new tax regime. In the old tax regime, individuals have the option to claim various tax deductions and exemptions to reduce their taxable income. The Old Tax Regime offers more than 70 deductions and exemptions to claims like Section 80C, HRA, LTA, and more. This regime is also called the existing tax regime.
Comparing the Tax Rates of Old Tax Regime and New Tax Regime:
| Income Tax Slab (Rs.) |
Old Tax Regime FY 2022-23 (AY 2023-24)
and FY 2023-24 (AY 2024-25) |
New tax Regime (Before budget 2023) |
New Tax Regime
(Applicable for FY 2023-24 (AY 2024-25) |
| 0 - 2,50,000 |
- |
- |
- |
| 2,50,001 - 3,00,000 |
5% |
5% |
- |
| 3,00,001 - 5,00,000 |
5% |
5% |
5% |
| 5,00,001 - 6,00,000 |
20% |
10% |
5% |
| 6,00,001 - 7,50,000 |
20% |
10% |
10% |
| 7,50,001 - 9,00,000 |
20% |
15% |
10% |
| 9,00,001 - 10,00,000 |
20% |
15% |
15% |
| 10,00,001 - 12,00,000 |
30% |
20% |
15% |
| 12,00,001 - 12,50,000 |
30% |
20% |
20% |
| 12,50,001 - 15,00,000 |
30% |
25% |
20% |
| More than 15,00,000 |
30% |
30% |
30% |
Income Tax Slab Rates for FY 2023-24 (AY 2024-25)
Income Tax Rate for Resident Individual
| Old Regime |
Slabs (Rs.) |
Individuals
(Age < 60 years) |
Resident Senior Citizens
(≥60 but <80 years) |
Resident Super Senior Citizens
(80 years and above) |
| Up to 2,50,000 |
Nil |
Nil |
Nil |
| 2,50,001 to 3,00,000 |
5% |
Nil |
Nil |
| 3,00,001 to 5,00,000 |
5% |
5% |
Nil |
| 5,00,001 to 10,00,000 |
20% |
20% |
20% |
| Above 10,00,000 |
30% |
30% |
30% |
| New Regime |
| Slabs (Rs.) |
Income Tax Rates |
| Up to 3,00,000 |
Nil |
| 3,00,001 to 6,00,000 |
5% (Tax rebate u/s 87A) |
| 6,00,001 to 900,000 |
10% (Tax rebate u/s 87A up to Rs 7 lakh) |
| 9,00,001 to 12,00,000 |
15% |
| 12,00,001 to 1500,000 |
20% |
| Above 15,00,000 |
30% |
Note:1. In Addition to basic Income Tax, as discussed above, the following are also to be taken care of:-
- Surcharge: A surcharge is levied on the amount of income tax at the following rates if the total income of an assessee exceeds specified limits:-
| Rs. 50 Lakhs to Rs. 1 Crore |
Rs. 1 Crore to Rs. 2 Crores |
Rs. 2 Crores to Rs. 5 Crores |
More Than 5 Crores |
| 10% |
15% |
25% |
37% |
- Health & Education Cess @4%
- Rebate u/s 87A (no tax will be payable on total income upto Rs. 5 lakh in both the new and old tax regimes). The rebate is allowed to the extent of Rs. 12,500. Thus, if the total tax (excluding health & education cess) is less than or equal to Rs. 12,500, then the whole amount can be claimed as a rebate by a resident individual.
Certain income tax exemptions and deductions like sections 80C, 80D,80TTB, HRA, etc, are available in the OLD tax regime but will not be available under the new tax regime.
Income Tax Rate for Non-Resident Individual
| Income of the assessee (Rs.) |
Rate of Tax under Old Regime for FY 2023-24 (AY 2024-25) |
New Regime Slab Rates for FY 2023-24 (AY 2024-25) |
| 0 to Rs 2,50,000 |
NIL |
NIL |
| 2,50,001 to 5,00,000 |
5% |
5% |
| 5,00,001 to 7,50,000 |
20% |
10% |
| 7,50,001 to 10,00,000 |
20% |
15% |
| 10,00,001 to 12,50,000 |
30% |
20% |
| 12,50,001 to 15,00,000 |
30% |
25% |
| >15,00,000 |
30% |
30% |
Note:
Surcharge & cess are also applicable here, as in the case of the resident.
|
Income Tax Rate for AOP/BOI/Artificial Judicial Person
| Income of the assessee (Rs.) |
Rate of Tax under Old Regime for FY 2023-24 (AY 2024-25) |
| 0.0 to 2,50,000 |
NIL |
| 2,50,001 to 5,00,000 |
5% |
| 5,00,001 to 10,00,000 |
20% |
| Above 10,00,000 |
30% |
Income Tax Rate for a Domestic Company
| Domestic Company |
NORMAL TAX RATE |
| Assessment Year 2022-23 |
Assessment Year 2023-24 |
| Where its total turnover or gross receipt during the previous year, 2019-20, does not exceed Rs. 400 crore |
25% |
NA |
| Where its total turnover or gross receipt during the previous year 2020-21 does not exceed Rs. 400 crore |
NA |
25% |
| Any other domestic company |
30% |
30% |
Also, the Government introduced special tax rates for domestic companies under various sections; these can be summarized as:-
| Domestic Company |
SPECIAL TAX RATES |
| Assessment Year 2022-23 |
Assessment Year 2023-24 |
| Where it opted for section 115BA |
25% |
25% |
| Where it opted for Section 115BAA |
22% |
22% |
| Where it opted for Section 115BAB |
15% |
15% |
Note:
1. In Addition to basic Income Tax, as discussed above, the following are also to be taken care of:-
- Surcharge: Surcharge is levied on the amount of income tax at the following rates if the total income of an assessee exceeds specified limits:-
| Rs. 1 Crore to 10 Crores |
Above Rs. 10 Crore |
| 7% |
12% |
The rate of surcharge in case of a company opting for taxability under Section 115BAA or Section 115BAB shall be flat 10% irrespective of the amount of total income.
- Health & Education Cess @4%
2. MAT Provisions as per section 115JB would also be applicable while calculating tax payable.
Income Tax Rate for a Foreign Company
| Nature of Income |
Tax Rate |
| Royalty received from the Government or an Indian concern in pursuance of an agreement made with the Indian concern after March 31, 1961, but before April 1, 1976, or fees for rendering technical services in pursuance of an agreement made after February 29, 1964, but before April 1, 1976, and where such agreement has, in either case, been approved by the Central Government |
50% |
| Any other income |
40% |
Note:
1. In Addition to basic Income Tax, as discussed above, the following are also to be taken care of:-
- Surcharge: A surcharge is levied on the amount of income tax at the following rates if the total income of an assessee exceeds specified limits:-
| Rs. 1 Crore to 10 Crores |
Above Rs. 10 Crore |
| 2% |
5% |
- Health & Education Cess @4%
2. MAT Provisions as per section 115JB would also be applicable while calculating tax payable.
|
Surcharge on Income Tax for FY 23-24
In the event that an individual's income exceeds a certain threshold, additional taxes are levied on top of the existing tax rates. This constitutes an extra tax burden primarily targeted at high-income earners.
The surcharge rates are structured as follows:
- 10% of Income tax if total income is greater than Rs.50 lakh but less than Rs.1 crore.
- 15% of Income tax if total income is greater than Rs.1 crore but less than Rs.2 crore.
- 25% of Income tax if total income is greater than Rs.2 crore but less than Rs.5 crore.
- 37% of Income tax if total income exceeds Rs.5 crore.
It's worth noting that in Budget 2023, the highest surcharge rate of 37% was reduced to 25% under the new tax regime, effective from 1st April 2023.
However, certain income sources are exempted from the highest surcharge rates of 25% or 37%. These include income from dividends and capital gains taxable under sections 111A (Short Term Capital Gain on Shares), 112A (Long Term Capital Gain on Shares), and 115AD (Tax on the income of Foreign Institutional Investors). For such incomes, the highest surcharge rate on the tax payable is capped at 15%.
Additionally, the surcharge rate for an Association of Persons (AOP) consisting entirely of companies is also limited to 15%.
Furthermore, an additional Health and Education cess at the rate of 4% is applied to the income tax liability, contributing to government funds designated for healthcare and educational initiatives.
What are the Exemptions/Deductions unavailable under the new tax regime?
The 2020 budget has removed approximately 70 of the 100 exemptions available under the new regime. The following exemptions and deductions are some of the most important ones that would not be available if the new tax slab is chosen for tax calculation –
- House Rent Allowance under Section 10 (13A)
- Leave Travel Allowance under Section 10(5)
- Allowances under Section 10(14)
- Food coupons and other tax-free allowances and perquisites
- Deductions under Chapter VI A of the Income Tax Act like Section 80C, 80D, 80TTA, etc.
- Deduction for home loan interest paid for self-owned house property under Sections 24 (b) and Section 80EEA
What Exemptions/Deductions are Available Under the New Tax Regime?
The following deductions and exemptions would be available under the new tax regime –
- Employer’s contribution to the NPS for up to 10% of your salary under Section 80CCD (2) [ 14% in case of Central Govt employee]
- Standard deduction of 30% of net rental income if house property is let out.
- Home loan interest paid can be deducted from the rental income from the house property. However, loss from the House Property head can not be set off from any other head of income.
- Transport allowance exemption will be available to Divyang employees to meet the day-to-day travel expenses from the workplace to home.
- Conveyance allowance will be allowed to meet the expenditure on the conveyance to perform an official duty.
- Allowances granted will be allowed to meet the cost of traveling on tour or on transfer to the employees.
- Daily allowance granted for day-to-day ordinary expenses in case of absence from his / her normal place of duty.
What are the benefits or disadvantages of opting for the old tax regime/the new tax regime?
The various benefits and disadvantages of old and new tax regimes include
| Benefits |
Disadvantages |
| OLD TAX REGIME |
| Option to avail approx 70 exemptions and deductions under the Income Tax Act |
Investment only in specified options was required to claim the tax benefit. |
| Practice in submitting false disclosures for investment proofs is prevalent |
| NEW TAX REGIME |
| Tax Rates Reduced |
No major tax saving options given, increasing cash flow in the hands of taxpayers |
| Not attractive to those who are already investing and have binding premiums |
|
Important Points to Note if you are Opting for the New Tax Regime
Opting for the new tax regime in India can come with significant advantages and disadvantages, depending on your income, savings, and investment patterns. Here are some crucial points to consider before making the switch:
Benefits:
- Simpler Tax Filing: The new regime eliminates most deductions and exemptions, making tax filing a much simpler process. This can be ideal for individuals who find the old regime complicated and time-consuming.
- Lower Tax Rates: In many cases, the new regime offers lower tax rates likened to the old regime, especially for individuals with incomes up to Rs. 7 lakhs. This can lead to increased disposable income.
- Tax Rebate: Individuals with income up to Rs. 7 lakhs are eligible for a complete tax rebate under the new regime, effectively paying zero tax.
- Increased Liquidity: By eliminating the need for tax-saving investments, the new regime can free up your disposable income for other financial goals.
Drawbacks:
- Limited Deductions and Exemptions: You forego several valuable deductions and exemptions like HRA, LTA, educational expenses, medical insurance, etc., potentially increasing your taxable income.
- No Planning Flexibility: Without deductions, you lose the ability to lower your tax liability through investments and expenses strategically.
- Higher Tax Rates for High Earners: For individuals with incomes exceeding Rs. 10 lakhs, the new regime's tax rates can be higher than the old regime, especially with surcharges added for income above Rs. 5 crores.
- Limited Choice for Long-Term Investors: If you rely on tax-saving instruments for long-term wealth creation, the new regime may not be optimal as you miss out on their benefits.
Additional Points:
- You can switch between the new and old regimes every year at the time of filing your tax return.
- Carefully compare your tax liability under both regimes before making a decision. Tools like tax calculators can help with this.
- Consider your future income growth and investment plans when choosing a regime.
- Consult a tax advisor for personalized guidance based on your specific financial situation.
Example on How to Calculate Income Tax from Income Tax Slabs?
Let's walk through how Pooja, a salaried individual with an annual income of Rs. 8,50,000, calculates her income tax. Pooja has deductions under section 80C amounting to Rs. 1,50,000.
Pooja starts by figuring out her gross taxable income. So, it's Rs. 8,50,000 (her total income) minus Rs. 1,50,000 (deductions), which equals Rs. 7,00,000.
Now, let's dive into the tax slabs. There are three slabs:
Up to Rs. 5,00,000: 0% tax
Rs. 5,00,001 to Rs. 10,00,000: 20% tax
Above Rs. 10,00,000: 30% tax
Since Pooja's income falls in the Rs. 5,00,001 to Rs. 10,00,000 range, her tax rate is 20%.
Calculating the tax amount involves taking the income in this slab (Rs. 7,00,000 - Rs. 5,00,000) and applying the tax rate (20%). So, Pooja's tax amount within this slab is Rs. 40,000.
Now, surcharge. No worries for Pooja here because the surcharge applies to incomes exceeding Rs. 50 lakhs, and she's below that threshold.
Adding it all up, Pooja's total income tax for the financial year 2023-24 is Rs. 40,000. That's how she figures out her tax liability in a nutshell!
Tax2win AI integrated efiling portal provides you with all the computations and a detailed comparison of how much your taxability will be as per both regimes (old/new) so that you can decide which one is suitable for you. Filing ITR at Tax2win is easy and smooth. File ITR today
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