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As the financial year 2023-24 unfolds, understanding the intricacies of income tax slabs becomes imperative for every taxpayer in India. The Government of India has introduced a new tax regime alongside the existing old regime, offering individuals and businesses the flexibility to choose the option that best suits their financial circumstances. This comprehensive guide aims to demystify the complexities of income tax slabs, providing you with a clear understanding of the rates, deductions, and exemptions applicable under both regimes.
In this era of ever-evolving tax regulations, it’s crucial to stay informed and make well-informed decisions to optimize your tax liability. Whether you’re a salaried professional, a business owner, or an investor, this article will equip you with the knowledge and insights necessary to navigate the intricate world of income taxation in India.
What is an Income Tax Slab?
In India, the Income Tax system follows a slab-based approach, where different tax rates are assigned to different income ranges. As an individual’s income increases, the tax rates also progressively increase. This progressive taxation system aims to ensure a fair distribution of the tax burden, with higher-income earners contributing a larger share of their income towards taxes.
The income tax slabs are revised periodically, typically during the annual Union Budget, to account for factors such as inflation, economic growth, and changes in government policies. These slab rates vary for different groups of taxpayers, including individuals, senior citizens, super senior citizens, and non-residents.
Income Tax Slabs for FY 2023-24 (AY 2024-25)
For the financial year 2023-24 (assessment year 2024-25), the income tax slabs are divided into two distinct regimes: the old tax regime and the new tax regime. Let’s explore each regime in detail.
Old Tax Regime:
Under the old tax regime, taxpayers can avail various deductions, exemptions, and rebates, subject to specific conditions. The income tax slabs for different age groups are as follows:
Individuals aged below 60 years and non-residents:
| Income Slab | Tax Rate |
|---|---|
| Up to ₹2,50,000 | No tax |
| ₹2,50,001 – ₹3,00,000 | 5% |
| ₹3,00,001 – ₹5,00,000 | 5% |
| ₹5,00,001 – ₹10,00,000 | 20% |
| Above ₹10,00,000 | 30% |
Note: A tax rebate of up to ₹12,500 is applicable if the total income does not exceed ₹5,00,000 (not applicable for non-residents).
Individuals aged between 60 and 80 years (senior citizens):
Here’s a table representation of the income tax slabs and rates for individuals aged between 60 and 80 years (senior citizens):
| Income Slab | Tax Rate |
|---|---|
| Up to ₹3,00,000 | No tax |
| ₹3,00,001 – ₹5,00,000 | 5% |
| ₹5,00,001 – ₹10,00,000 | 20% |
| Above ₹10,00,000 | 30% |
Individuals aged above 80 years (super senior citizens):
| Income Slab | Tax Rate |
|---|---|
| Up to ₹5,00,000 | No tax |
| ₹5,00,001 – ₹10,00,000 | 20% |
| Above ₹10,00,000 | 30% |
New Tax Regime:
The new tax regime, introduced in the Union Budget 2020, offers a simplified tax structure with lower tax rates but fewer deductions and exemptions. The income tax slabs under the new regime for FY 2023-24 (AY 2024-25) are as follows:
| Income Slab | Tax Rate |
|---|---|
| Up to ₹3,00,000 | No tax |
| ₹3,00,001 – ₹6,00,000 | 5% |
| ₹6,00,001 – ₹9,00,000 | 10% |
| ₹9,00,001 – ₹12,00,000 | 15% |
| ₹12,00,001 – ₹15,00,000 | 20% |
| Above ₹15,00,000 | 30% |
Note: A tax rebate of up to ₹25,000 is applicable if the total income does not exceed ₹7,00,000 (not applicable for non-residents).
Comparison of Tax Rates under New and Old Regimes:
To better understand the differences between the two regimes, let’s compare the tax rates side by side:
Here’s a table representation of the income tax slabs and rates for different age groups under the old regime and the new regime:
| Income Slab | Old Regime (Below 60 Years) | Old Regime (60-80 Years) | Old Regime (Above 80 Years) | New Regime |
|---|---|---|---|---|
| Up to ₹2,50,000 | No tax | No tax | No tax | No tax |
| ₹2,50,001 – ₹3,00,000 | 5% | No tax | No tax | No tax |
| ₹3,00,001 – ₹5,00,000 | 5% | 5% | No tax | 5% |
| ₹5,00,001 – ₹6,00,000 | 20% | 20% | 20% | 5% |
| ₹6,00,001 – ₹7,50,000 | 20% | 20% | 20% | 10% |
| ₹7,50,001 – ₹9,00,000 | 20% | 20% | 20% | 10% |
| ₹9,00,001 – ₹10,00,000 | 20% | 20% | 20% | 15% |
| ₹10,00,001 – ₹12,00,000 | 30% | 30% | 30% | 15% |
| ₹12,00,001 – ₹12,50,000 | 30% | 30% | 30% | 20% |
| ₹12,50,001 – ₹15,00,000 | 30% | 30% | 30% | 20% |
| Above ₹15,00,000 | 30% | 30% | 30% | 30% |
This comparison highlights the distinct differences in tax rates between the two regimes, allowing you to evaluate which option might be more advantageous for your specific financial situation.
Calculating Income Tax from Income Tax Slabs:
To better understand how income tax calculations work, let’s consider an example:
Saleem has a total taxable income of ₹8,00,000 for FY 2023-24 (AY 2024-25). This income has been calculated by including income from all sources, such as salary, rental income, and interest income, and after deducting eligible deductions under Section 80. Saleem wants to know his tax dues under the old regime.
| Income Tax Slabs | Tax Rate | Tax Amount |
|---|---|---|
| Income up to ₹2,50,000 | No tax | – |
| Income from ₹2,50,000 – ₹5,00,000 | 5% | (₹5,00,000 – ₹2,50,000) = ₹12,500 |
| Income from ₹5,00,000 – ₹10,00,000 | 20% | (₹8,00,000 – ₹5,00,000) = ₹60,000 |
| Income more than ₹10,00,000 | 30% | – |
| Tax | – | ₹72,500 |
| Cess (4% of ₹72,500) | – | ₹2,900 |
| Total tax for FY 2023-24 (AY 2024-25) | – | ₹75,400 |
Note: Saleem is an individual taxpayer assessee having an income tax exemption of ₹2,50,000. For senior citizens and super senior citizens, the income tax exemption limit would be ₹3,00,000 and ₹5,00,000, respectively.
This example illustrates how the income tax liability is calculated based on the applicable tax slabs and rates under the old regime.
Important Points to Note for the New Tax Regime:
- Tax rates are the same for all categories of individuals (individuals, senior citizens, and super senior citizens) under the new regime.
- Individuals with a net taxable income of up to ₹7 lakh will be eligible for a tax rebate under Section 87A, resulting in a nil tax liability under the new regime.
- Under the new regime, several deductions and exemptions are not allowed, including:
| Deductions/Exemptions | Old Regime | New Regime (until 31st March 2023) | New Regime (From 1st April 2023) |
|---|---|---|---|
| Income level for rebate eligibility | ₹5 lakhs | ₹5 lakhs | ₹7 lakhs |
| Standard Deduction | ₹50,000 | – | ₹50,000 |
| Effective Tax-Free Salary income | ₹5.5 lakhs | ₹5 lakhs | ₹7.5 lakhs |
| Rebate u/s 87A | ₹12,500 | ₹12,500 | ₹25,000 |
| HRA Exemption | Allowed | Not Allowed | Not Allowed |
| Leave Travel Allowance (LTA) | Allowed | Not Allowed | Not Allowed |
| Other allowances (food, etc.) | Allowed | Not Allowed | Not Allowed |
| Interest on Home Loan (Self-Occupied) | Allowed (u/s 24b) | Not Allowed | Not Allowed |
| Interest on Home Loan (Let-Out) | Allowed (u/s 24b) | Allowed | Allowed |
| Deduction u/s 80C (EPF, LIC, ELSS, etc.) | Allowed | Not Allowed | Not Allowed |
| NPS Contributions (Employee’s Own) | Allowed | Not Allowed | Not Allowed |
| NPS Contributions (Employer’s) | Allowed | Allowed | Allowed |
| Medical Insurance Premium (80D) | Allowed | Not Allowed | Not Allowed |
| Deduction for Disability (80U) | Allowed | Not Allowed | Not Allowed |
| Interest on Education Loan (80E) | Allowed | Not Allowed | Not Allowed |
| Interest on Electric Vehicle Loan (80EEB) | Allowed | Not Allowed | Not Allowed |
| Donations (80G) | Allowed | Not Allowed | Not Allowed |
| Savings Bank Interest (80TTA, 80TTB) | Allowed | Not Allowed | Not Allowed |
| Other Chapter VI-A Deductions | Allowed | Not Allowed | Not Allowed |
| Agniveer Corpus Fund (80CCH) | Allowed | N/A | Allowed |
| Family Pension Income Deduction | Allowed | Not Allowed | Allowed |
This table highlights the significant differences in deductions and exemptions between the old and new tax regimes, which can significantly impact your overall tax liability.
Surcharge and Applicable Rates:
In addition to the regular income tax, a surcharge is levied on high-income earners. The surcharge rates are as follows:
- 10% of income tax if the total income exceeds ₹50 lakh but is less than ₹1 crore.
- 15% of income tax if the total income exceeds ₹1 crore but is less than ₹2 crore.
- 25% of income tax if the total income exceeds ₹2 crore but is less than ₹5 crore.
- 37% of income tax if the total income exceeds ₹5 crore.
However, in Budget 2023, the highest surcharge rate of 37% has been reduced to 25% under the new tax regime (applicable from April 1, 2023).
It’s important to note that the surcharge rates of 25% or 37% will not apply to income from dividends and certain capital gains, where the highest surcharge rate will be capped at 15%.
Additionally, a Health and Education Cess at the rate of 4% will be added to the income tax liability in all cases.
Consequences of Not Filing the Return Within the Due Date:
It’s crucial to file your income tax return within the prescribed due date to avoid consequences. If you fail to file your return within the due date for FY 2023-24, you will be required to opt for the concessional rates under the new tax regime, forgoing certain exemptions and deductions available in the old tax regime.
Under the new tax regime, you will not be eligible for the following deductions and exemptions:
- House Rent Allowance (HRA)
- Leave Travel Allowance (LTA)
- Standard deduction
- Deductions under Section 80C (EPF, LIC, ELSS, PPF, FD, children’s tuition fees)
- Medical insurance premium under Section 80D
- Interest on education loans under Section 80E
- Donations under Section 80G
- Any other deductions and exemptions available under the old tax regime
It’s essential to carefully evaluate both regimes and make an informed decision about which option aligns better with your financial goals and circumstances.
Old Tax Regime vs. New Tax Regime: Which is Better?
The choice between the old tax regime and the new tax regime largely depends on your individual financial circumstances and investment preferences. Here’s a general guideline:
The new tax regime can be beneficial for middle-class taxpayers with a taxable income of up to ₹15 lakh, especially those who make fewer investments or claim fewer deductions and exemptions.
On the other hand, the old regime may be more advantageous for high-income earners who have substantial investments in tax-saving instruments, avail of deductions for home loans, medical insurance premiums, and other eligible deductions and exemptions.
It’s advisable to perform a comparative evaluation and analysis under both regimes to determine which option offers a lower tax outgo based on your specific financial situation.
Income Tax Rates for Domestic Companies:
For domestic companies, the income tax rates for FY 2023-24 are as follows:
- Companies opting for Section 115BAB (registered on or after October 1, 2019, and commenced manufacturing on or before March 31, 2024): 15%
- Companies opting for Section 115BAA (without claiming specified deductions, incentives, or exemptions): 22%
- Companies opting for Section 115BA (engaged in manufacturing and not claiming certain deductions): 25%
- Companies with a turnover or gross receipt of less than ₹400 crore in the previous year 2020-21: 25%
- Any other domestic company: 30%
Additional Health and Education Cess at the rate of 4% will be added to the income tax liability, and surcharge rates vary based on the company’s total income.
Income Tax Rates for Partnership Firms/LLPs:
Partnership firms and Limited Liability Partnerships (LLPs) are taxable at a flat rate of 30%. A 12% surcharge is levied on income exceeding ₹1 crore, and a Health and Education Cess of 4% is applicable.
Income Tax Slab Rates for Previous Financial Years:
For reference, here are the income tax slab rates for previous financial years:
FY 2022-23:
- The tax rates for individuals and HUFs under the old regime remained the same as FY 2023-24.
- The new regime tax rates were slightly different, with a 5% tax rate for income between ₹2,50,000 and ₹5,00,000.
FY 2021-22, FY 2020-21, and FY 2019-20:
- The tax rates for individuals, HUFs, and domestic companies were the same as FY 2022-23 under the old regime.
- The new regime was not introduced until FY 2020-21.
FY 2018-19 and FY 2017-18:
- The tax rates for individuals, HUFs, and domestic companies followed a different structure, with varying income slabs and surcharge rates.
It’s essential to refer to the relevant financial year’s tax rates and slabs for accurate tax calculations and planning.
Income Tax Slab Rates for FY 2022-23 (AY 2023-24)
a. New Tax Regime until 31st March 2023:
| Income Slabs | Individuals (for all age categories) |
|---|---|
| Up to ₹2,50,000 | Nil |
| ₹2,50,001 – ₹5,00,000* | 5% |
| ₹5,00,001 – ₹7,50,000 | 10% |
| ₹7,50,001 – ₹10,00,000 | 15% |
| ₹10,00,001 – ₹12,50,000 | 20% |
| ₹12,50,001 – ₹15,00,000 | 25% |
| ₹15,00,001 and above | 30% |
*Tax rebate up to ₹12,500 is applicable if the total income does not exceed ₹5,00,000 (not applicable for NRIs)
b. Old Tax Regime:
| Income Slabs | Individuals of Age < 60 Years and NRIs |
|---|---|
| Up to ₹2,50,000 | Nil |
| ₹2,50,001 – ₹5,00,000 | 5% |
| ₹5,00,001 to ₹10,00,000 | 20% |
| ₹10,00,001 and above | 30% |
| Income Slabs | Individuals of Age 60 Years to 80 Years |
|---|---|
| Up to ₹3,00,000 | Nil |
| ₹3,00,001 – ₹5,00,000 | 5% |
| ₹5,00,001 to ₹10,00,000 | 20% |
| ₹10,00,001 and above | 30% |
| Income Slabs | Individuals of Age above 80 Years |
|---|---|
| Up to ₹5,00,000 | Nil |
| ₹5,00,001 to ₹10,00,000 | 20% |
| ₹10,00,001 and above | 30% |
Income Tax Slab Rates for Domestic Companies FY 2017-18
| Turnover | Tax Rate |
|---|---|
| Gross turnover up to ₹250 crore in the previous year | 25% |
| Gross turnover exceeding ₹250 crore in the previous year | 30% |
It’s important to note that the tax rates and slabs mentioned above are subject to change based on the announcements made in the respective Union Budgets. It’s advisable to consult with a tax professional or refer to the latest income tax regulations for accurate information.
FAQs:
What is the difference between the old tax regime and the new tax regime?
The old tax regime allows taxpayers to claim various deductions, exemptions, and rebates, while the new tax regime offers lower tax rates but with fewer deductions and exemptions.
Can I switch between the old and new tax regimes every year?
No, the choice between the old and new tax regimes can only be made once in a lifetime for individuals with business or professional income. For salaried individuals, the choice can be revised annually by informing their employer.
Do I need to file a separate form to opt for the new tax regime?
No separate form is required. If you opt for the new tax regime, you can simply choose the appropriate option while filing your income tax return.
Are the tax rates under the new regime the same for all age groups?
Yes, the tax rates under the new regime are the same for individuals, senior citizens, and super senior citizens.
Can I claim the standard deduction under the new tax regime?
Under the new regime, the standard deduction of ₹50,000 is allowed for salaried individuals from FY 2023-24 onwards.
What is the maximum income level to be eligible for the tax rebate under the new regime?
Individuals with a net taxable income of up to ₹7 lakh are eligible for a tax rebate of up to ₹25,000 under the new regime.
Conclusion and Call-to-Action:
Navigating the intricate world of income tax slabs and regimes can be a daunting task, but with the right knowledge and guidance, you can make informed decisions to optimize your tax liability. By understanding the nuances of the old and new tax regimes, you can choose the option that best aligns with your financial goals and circumstances.
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