New Income Tax Slabs for FY 2023-24 (AY 2024-25)

What is the Income tax slab?

The taxpayers in India need to pay income tax basis on the income tax slab they fall in. 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 60 to 80 years
• Super senior citizens with age above 80 years.

New Income Tax Slabs as per Budget 2023

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:-

The income tax slab rates for the old regime are the same as previous years’ income tax slab rates.

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 be the best suitable for you.

New Tax Regime

The new tax regime was introduced in Budget 2020, effective from 1st April 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 budget 2023-24 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 also been introduced under the new tax regime.
• Reduction in the surcharge on annual income above 5 crores 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 offers more than 70 deductions and exemptions to claim like Section 80C, HRA, LTA, and more. This regime is also called the existing tax regime.

Have you also been stuck between the choice of a more beneficial tax regime?? Calculate your income tax here.

Income Tax Slab Rates for FY 2022-23 (AY 2023-24)

Also, the Government introduced special tax rates for domestic companies under various sections, these can be summarized as:-

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:-

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.

What are the Exemptions/Deductions unavailable under the new tax regime?

The 2020 budget has removed approx 70 of the available 100 exemptions under the new regime. The following exemptions and deductions are some of the most important ones which would not be available if the new tax slab is chosen for tax calculation –

1. House Rent Allowance under Section 10 (13A)
2. Leave Travel Allowance under Section 10(5)
3. Allowances under Section 10(14)
4. Food coupons and other tax-free allowances and perquisites
5. Deductions under Chapter VI A of the Income Tax Act like Section 80C, 80D, 80TTA, etc.
6. Deduction for home loan interest paid for self-owned house property under Sections 24 (b) and Section 80EEA

Which exemptions and deductions are available under the new tax regime?

The following deductions and exemptions would be available under the new tax regime –

1. Employer’s contribution to the NPS for up to 10% of your salary under Section 80CCD (2) [ 14% in case of Central Govt employee]
2. Standard deduction of 30% of net rental income if house property is let out.
3. 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.
4. Transport allowance exemption will be available to Divyang employees to meet the day-to-day travel expenses from the workplace to home.
5. Conveyance allowance will be allowed to meet the expenditure on the conveyance to perform an official duty.
6. Allowances granted will be allowed to meet the cost of traveling on tour or on transfer to the employees.
7. 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 regimes/the new tax regime?

The various benefits and disadvantages of old and new tax regimes include

To understand better which tax regime is suitable for which tax slab and to calculate the tax liability under both tax regimes you can use our Tax Planning Optimizer which provides tax liability for both the new tax regime and the old tax regime.