Income Tax Slab for FY 2022-23, AY 2023-24 | New Tax & Slab Rates in India

Recent change in the income tax slab indicates how the financial world keeps changing. In the Union Budget 2023, a few changes have been announced for the income tax slab rates under the new tax regime.

The new tax regime will also become the default tax system over the passage of time, while the old one is still available to the taxpayers.

What is an Income Tax Slab?

Income tax is the amount paid by a person, group of individuals, or entities based on their level of gains and income during a financial year. This income could either be actual, notional, or even both. Government of India decides the amount of tax for a financial year during the Union Budget. In India, the tax is calculated as per an income tax slab. It means individuals will pay tax basis their level of income.

In short, a person who earns a higher income will have to pay a higher amount of tax. Tax incentives are also available for individuals who pay long-term funds.

Income tax slabs tend to change over time, considering the fluctuation of inflation levels. Apart from this, the government also ensures to provide a rebate on the tax for individuals falling under a lower-income group. The idea behind the tax slab is to ensure a progressive and fair tax structure in the country.

Changes in Tax Revenue as per Budget 2023-24

Based on the Union Budget 2023-24, the gross tax revenue has increased by 10.4% from the revised estimates of FY 2022-23. The borrowings may also increase by 27% compared to the FY 2019-20.

What are the Different Types of Taxable Incomes in India?

Eligibility for Income Tax

An income tax of 0% is levied against individuals with an income of ₹2.5 lakhs annually under the old tax regime.

You can also opt for taxation under the new tax regime and enjoy exempt income of up to ₹3 lakhs.

A 5% tax is deducted for individuals earning between ₹2.5 lakh to ₹5 lakh under the old tax regime. 20% is the rate for individuals earning between ₹5 lakhs and 30% for individuals with an annual income over ₹10 lakhs.

While the 5% tax rate will apply to the taxable income of ₹3 lakh to ₹6 lakh under the revised tax slabs. 30% tax rate will apply to taxpayers with taxable income of ₹15 lakhs and above.

On the other hand, 4% is charged to health and education regardless of their income. There is a surcharge of 10% levied against individuals who earn between ₹50 lakhs to ₹1 crore. A 15% tax surcharge is applicable on individuals with an annual income of over ₹1 crore. The maximum surcharge capping is 25% as per the latest Budget of 2023-24.

Learn about - Income Tax Surcharge.

Also, under section 87A of the Income tax Act, 1961, a tax rebate of up to ₹12,500 is given to individuals with a total income of ₹5 lakhs after certain deductions. However, if the taxable income is over ₹ 5 lakhs, tax will be calculated as usual.

New Income Tax Slabs & Rates for FY 2023-24 & AY 2024-25

Senior citizens over 75 years dependent on pension and income interests are exempted from filling tax returns. In such cases, TDS (Tax Deducted of Source) will automatically be deducted by banks.

Special Tax Rates for Individuals & HUFs for FY 2023-24/AY 24-25

Individuals and HUF get an option for payment of taxes at the given concessional rates as per the Finance Act, 2020 from Assessment Year 2024-25 and onwards:

Difference of Tax Slab Rates between New Tax Regime and Old Tax Regime for FY 21-22 & AY 22-23

New income tax slab rates allow a tax liability of 10% if your taxable income is ₹15 lakhs. Under the old tax regime, your tax liability was 14% of your taxable income.

Example of Tax Payable Under New & Old Tax Regime

Dr. Shalini is a 30-year-old Physiotherapist. She’s self-employed and has estimated her income from her profession for the financial year 2023-24 to be ₹15 lakhs. She has been investing up to ₹2.5 lakhs in the tax-saving plans eligible for deduction under section 80C.

She also has a health insurance plan for herself and her parents (not senior citizens) with a total premium of ₹41,000. Her tax liability for the FY 2023-24 will be:

Income Tax Slabs for AY 2024-25

Individuals and HUFs can opt for the existing or the new tax regime with a lower rate under section 115 BAC of the Income Tax Act. If a taxpayer opts for concessional rates in the new tax regime, they will not be eligible for certain tax benefits and deductions.

Tax Slabs for Individuals below 60 years for AY 24-25 / FY 23-24

Cess Applicable on Income Tax for Individuals below 60 Years

A Health & Education Cess is applicable on your tax liability plus estimated as per the income tax slab plus surcharge. Health and Education Cess applies at a rate of 4% of the income tax amount.

For example, if your total tax liability as per the income tax slab is ₹50,000. First, you need to add a surcharge tax to this amount. Thus, if your tax liability after this is ₹55,000, you need to add Health & Education Cess at 4% to it.

Thus, after Health & Education Cess, your total tax liability will be ₹57,200.

Tax Rebate under Section 87A

However, if your taxable income does not exceed ₹7 Lakhs in the previous year, you can claim a rebate under Section 87A. This section allows a rebate of up to ₹25,000 on your tax liability before cess and surcharge.

Standard Deduction

Standard Deduction is available to salaried professionals, pensioners, and family pensioner taxpayers under the new tax regime. For salaried professionals, it is limited to ₹50,000, whereas, the limit for family pensioners is ₹15,000 for AY 2024-25.

Surcharge Applicable on Income Tax for Individuals below 60 Years

Surcharge applies to your tax liability estimated as per the income tax slab for the assessment year. The rate of applicable surcharge varies based on your total taxable income:

The maximum surcharge rate is limited to 15% in case of capital gain incomes under sections 111A, 112A, and 115AD.

Tax Slabs for Senior Citizens (60 to 80 Years) for AY 24-25/ FY 23-24

Tax Slabs for Super Senior Citizens (Above 80 Years) for AY 24-25/ FY 23-24

Income Tax Slab Rates for NRIs

Income Tax Slabs for Women

Income tax slabs for AY 2024-25 and 2023-24 for women are same as men under both new and old tax regimes.

Income tax slabs for women under old income tax regime are given below:

Income tax slabs for women under the new income tax regime are given below:

Surcharge Applicability for FY 23-24 & AY 24-25

The maximum surcharge rate for capital gains under sections 111A, 112A and 115AD are limited to 15% regardless of the taxable amount.

Income Tax Slabs for Domestic Company for FY 2023-24 & AY 2024-25

Income-tax slab for FY 2023-24 (AY 2023-24 & 2024-25) applicable in the case of domestic companies are as follows:

Surcharge & Cess Application for Domestic Company (AY 2024-25 & 2023-24)

Unless the domestic company has opted for a special income tax slab, the surcharge rate will apply at:

Marginal relief will also apply to firms with incomes where the surcharge exceeds their excess income. For example:

If the surcharge increases the tax payable by ₹1 Lakh while excess income over ₹1 Crore is less than ₹1 Lakh, the surcharge is not payable.

Health & Education Cess applies to the tax payable after adding the surcharge at 4%.

Income Tax Slabs for Partnership Firm for FY 2023-24 & AY 2024-25

Partnership firms including LLPs (Limited liability partnerships) are taxable at 30% for AY 2024-25. Unlike individual and HUF taxpayers, LLPs and partnership firms do not get a tax slab treatment for their income tax calculations.

A surcharge of 12% will also apply to the payable tax amount if the income of the partnership firm exceeds ₹1 Crore. Marginal relief applies if the surcharge is more than ₹1 Crore.

4% Health and education cess also applies to the tax slab amount plus a surcharge.

New Tax Regime vs. Old Tax Regime – Which is Better?

Should you opt for the new tax regime or stick to the old one? To help you choose a better option, we have broke down the tax estimation as per different salary slabs.

When you have a Taxable Income Less than ₹10 Lakhs

Thus, following the old tax regime makes more sense if you have tax-saving investments such as life insurance, provident fund investments, and health insurance premiums.

When you have a Taxable Income Between ₹10 Lakhs and ₹15 Lakhs

Thus, with income reaching the highest slab rate, the new tax regime is beneficial, even with deductions.

However, if you have a home loan on a self-occupied property, you can increase the deduction amount and get benefits under the old tax slab rates. Deduction of interest paid on a home loan taken for a self-occupied house does not affect your tax liability under the new tax regime.

You can still get benefits up to ₹2 Lakhs from the interest payment on a home loan taken for a let-out property under the new tax regime.

What if your Income Exceeds ₹15 Lakhs?

As you can see in the table for total taxable income of ₹20 Lakhs, the new tax regime will help save about ₹1 Lakh in tax outflow without deductions.

Besides this, the income tax slab for HUF (Hindu Undivided Family), as well as AOP (Associations of Persons), BOI (Body of Individuals), and Artificial Juridical Person remain the same as for non-resident individuals.

Knowing what rate you pay based on your income is important for tax planning.