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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.
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.
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.
Any income or earning, taxable allowances, and even any profit you have made from your salary is taxable. It means that the pension you receive on retirement is taxable. The income obtained from salary and pension is part of the computation of taxable income.
It is calculated from the presumptive (Read more about Presumptive Taxation) and actual income of a business or profession. However, it is only done after adjustments to the deductions are made.
Individuals owning more than one housing property or have properties on rent have to pay income tax on that income.
Income tax is levied based on the rent amount, which you receive. Any net income or loss generated under this will be included or removed from the income of the other properties.
Anything earned through such activities are taxable and are added to the total income of a person. They are taxed separately. These types of income fall under an entirely different category, which has a different tax rate.
Income from selling certain assets like properties, gold, mutual funds units, stocks are taxable. Based on what type of asset and how long a person has owned and made profits on it, it will be classified as long-term or short-term capital gain.
Though these gains are also a part of the income tax, they are not added to the taxable amount.
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.
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.
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:
Total Income | Income Tax Rate |
---|---|
Up to ₹3,00,000 | Nill |
₹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% |
Income Tax Slab | Tax Rates as per New Regime | Tax Rates as per Old Regime |
---|---|---|
₹0 - ₹3,00,000 | Nil | Nil |
₹3,00,001 - ₹6,00,000 | 5% | 5% (only up to ₹5 lakhs) |
₹6,00,001 - ₹9,00,000 | ₹15,000 + 10% of total income exceeding ₹6,00,000 | ₹12,500 + 20% of total income exceeding ₹5,00,000 |
₹9,00,001 - ₹12,00,000 | ₹45,000 + 15% of total income exceeding ₹9,00,000 | ₹62,500 + 20% of total income exceeding ₹7,50,000 |
₹12,00,001 - ₹15,00,000 | ₹ 90,000 + 20% of total income exceeding ₹ 10,00,000 | ₹112,500 + 30% of total income exceeding ₹10,00,000 |
Above ₹15,00,000 | ₹150,000 + 30% of total income exceeding ₹15,00,000 | ₹2,62,500 + 30% of total income exceeding ₹15,00,000 |
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.
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:
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.
Existing Tax Regime | New Tax Regime u/s 115BAC | ||
---|---|---|---|
Income Tax Slab | Income Tax Rate | Income Tax Slab | Income Tax Rate |
Up to ₹2,50,000 | Nil | ₹0 - ₹3,00,000 | Nil |
₹2,50,001 - ₹5,00,000 | 5% above ₹2,50,000 | ₹3,00,001 - ₹6,00,000 | 5% |
₹5,00,001 - ₹10,00,000 | ₹12,500 + 20% above ₹5,00,000 | ₹6,00,001 - ₹9,00,000 | ₹15,000 + 10% of total income exceeding ₹6,00,000 |
Above ₹10,00,000 | ₹1,12,500 + 30% above ₹10,00,000 | ₹9,00,001 - ₹12,00,000 | ₹45,000 + 15% of total income exceeding ₹9,00,000 |
₹12,00,001 - ₹15,00,000 | ₹90,000 + 20% of total income exceeding ₹10,00,000 | ||
Above ₹15,00,000 | ₹150,000 + 30% of total income exceeding ₹15,00,000 |
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.
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 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 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.
Old Tax Regime | New Tax Regime u/s 115BAC | ||
---|---|---|---|
Income Tax Slab | Income Tax Rate | Income Tax Slab | Income Tax Rate |
Up to ₹3,00,000 | Nil | ₹0 - ₹3,00,000 | Nil |
₹3,00,001 - ₹5,00,000 | 5% above ₹3,00,000 | ₹3,00,001 - ₹6,00,000 | 5% |
₹5,00,001 - ₹10,00,000 | ₹10,000 + 20% above ₹5,00,000 | ₹6,00,001 - ₹9,00,000 | ₹15,000 + 10% of total income exceeding ₹6,00,000 |
Above ₹10,00,000 | ₹1,10,000 + 30% above ₹10,00,000 | ₹9,00,001 - ₹12,00,000 | ₹45,000 + 15% of total income exceeding ₹9,00,000 |
₹12,00,001 - ₹15,00,000 | ₹90,000 + 20% of total income exceeding ₹10,00,000 | ||
Above ₹15,00,000 | ₹150,000 + 30% of total income exceeding ₹15,00,000 |
Existing Tax Regime | New Tax Regime u/s 115BAC | ||
---|---|---|---|
Income Tax Slab | Income Tax Rate | Income Tax Slab | Income Tax Rate |
Up to ₹5,00,000 | Nil | ₹0 - ₹3,00,000 | Nil |
₹5,00,001 - ₹10,00,000 | 20% above ₹5,00,000 | ₹3,00,001 - ₹6,00,000 | 5% |
Above ₹10,00,000 | ₹1,00,000 + 30% above ₹10,00,000 | ₹6,00,001 - ₹9,00,000 | ₹15,000 + 10% of total income exceeding ₹6,00,000 |
₹9,00,001 - ₹12,00,000 | ₹45,000 + 15% of total income exceeding ₹9,00,000 | ||
₹12,00,001 - ₹15,00,000 | ₹90,000 + 20% of total income exceeding ₹10,00,000 | ||
Above ₹15,00,000 | ₹150,000 + 30% of total income exceeding ₹15,00,000 |
Old Income Tax Slab Regime | New Income Tax Slab Regime | ||
---|---|---|---|
Up to ₹2,50,000 | NIL | Up to ₹3,00,000 | NIL |
₹2,50,001 - ₹5,00,000 | 5% | ₹3,00,001 - ₹6,00,000 | 5% |
₹5,00,001 - ₹10,00,000 | 20% | ₹6,00,001 - ₹9,00,000 | 10% |
Above ₹10,00,001 | 30% | ₹9,00,001 - ₹12,00,000 | 15% |
₹12,00,001 - ₹15,00,000 | 20% | ||
Above ₹15,00,000 | 30% |
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:
Maximum Exempt Income | - ₹250,000
- ₹300,000 for women aged between the age of 60 and 80 - ₹500,000 for super senior women (aged above 80 years) |
Tax Amount as Follows |
---|---|---|
Tax Slab Rate of 5% | Up to ₹500,000 | 12,500 |
Slab Rate of 20% | Up to ₹10,00,000 | ₹1,00,000 |
Slab Rate of 30% | After ₹10,00,000 | 30% of the excess income |
Income tax slabs for women under the new income tax regime are given below:
Total Income (₹) | Rate | Amount |
---|---|---|
₹0 - ₹3,00,000 | Nil | 0 |
₹3,00,001 - ₹6,00,000 | 5% | ₹15,000 |
₹6,00,001 - ₹9,00,000 | 10% | ₹15,000 + 10% of total income exceeding ₹6,00,000 |
₹9,00,001 - ₹12,00,000 | 15% | ₹45,000 + 15% of total income exceeding ₹9,00,000 |
₹12,00,001 - ₹15,00,000 | 20% | ₹90,000 + 20% of total income exceeding ₹10,00,000 |
Above ₹15,00,000 | 30% | ₹150,000 + 30% of total income exceeding ₹15,00,000 |
Taxable Income (₹) | Surcharge Rate |
---|---|
₹50 Lakhs to ₹1 Crore | 10% |
₹1 Crore to ₹2 Crore | 15% |
₹2 Crore to ₹5 Crore | 25% |
₹5 Crore to ₹10 Crore | 25% |
₹10 Crore & Above | 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 slab for FY 2023-24 (AY 2023-24 & 2024-25) applicable in the case of domestic companies are as follows:
Assessment Year | 2023-24 |
---|---|
Where the company’s total turnover or gross receipt during the previous year 20-21 does not exceed ₹400 Crore |
25% |
If opted for Section 115BA | 25% |
If opted for Section 115BAA | 22% |
If opted for Section 115BAB | 15% |
Any other domestic company | 30% |
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%.
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.
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.
Old Regime | New Regime | ||||
---|---|---|---|---|---|
Total Taxable Income | ₹10,00,000 | Total Taxable Income | ₹10,00,000 | ||
Tax Saving Investments | ₹2,00,000 | Tax Saving Investments | NA | ||
Total Income (₹) | Rates | ₹8,00,000 | Total Income (₹) | Rates | ₹10,00,000 |
Up to ₹2,50,000 | 0 | ₹0 - ₹3,00,000 | Nil | 0 | |
From ₹2,50,001 to ₹5,00,000 | 5% | ₹12,500 | ₹3,00,001 - ₹6,00,000 | 5% | ₹15,000 |
From ₹5,00,001 to ₹7,50,000 | 20% | ₹50,000 | ₹6,00,001 - ₹9,00,000 | 10% | ₹30,000 |
From ₹7,50,001 to ₹10,00,000 | 20% | ₹10,000 | ₹9,00,001 - ₹12,00,000 | 15% | ₹15,000 |
From ₹10,00,001 to ₹12,50,000 | 30% | - | ₹12,00,001 - ₹15,00,000 | 20% | - |
From ₹12,50,001 to ₹15,00,000 | 30% | - | Above ₹15,00,000 | 30% | - |
Above ₹15,00,000 | 30% | - | - | ||
- | ₹72,500 | ₹65,000 | |||
Surcharge | Surcharge | Nil | |||
Health & Education Cess | ₹2,900 | Health & Education Cess | 4% | ₹2,600 | |
Tax Payable | ₹75,400 | Tax Payable | ₹67,600 |
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.
Old Regime | New Regime | ||||
---|---|---|---|---|---|
Total Taxable Income | ₹14,00,000 | Total Taxable Income | ₹14,00,000 | ||
Tax Saving Investments | ₹2,00,000 | Tax Saving Investments | NA | ||
Total Income (₹) | Rates | ₹12,00,000 | Total Income (₹) | Rates | ₹14,00,000 |
Up to ₹2,50,000 | 0 | ₹0 - ₹3,00,000 | Nil | 0 | |
From ₹2,50,001 to ₹5,00,000 | 5% | 12,500 | ₹3,00,001 - ₹6,00,000 | 5% | ₹15,000 |
From ₹5,00,001 to ₹7,50,000 | 20% | ₹50,000 | ₹6,00,001 - ₹9,00,000 | 10% | ₹30,000 |
From ₹7,50,001 to ₹10,00,000 | 20% | ₹50,000 | ₹9,00,001 - ₹12,00,000 | 15% | ₹45,000 |
From ₹10,00,001 to ₹12,50,000 | 30% | ₹60,000 | ₹12,00,001 - ₹15,00,000 | 20% | ₹40,000 |
From ₹12,50,001 to ₹15,00,000 | 30% | Above ₹15,00,000 | 30% | - | |
Above ₹15,00,000 | 30% | - | |||
- | ₹1,72,500 | ₹1,30,000 | |||
Surcharge | Surcharge | Nil | |||
Health & Education Cess | ₹6,900 | Health & Education Cess | 4% | ||
Tax Payable | ₹1,79,400 | Tax Payable | ₹1,35,200 |
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.
Old Regime | New Regime | ||||
---|---|---|---|---|---|
Total Taxable Income | ₹20,00,000 | Total Taxable Income | ₹20,00,000 | ||
Tax Saving Investments | ₹2,00,000 | Tax Saving Investments | NA | ||
Total Income (₹) | Rates | ₹18,00,000 | Total Income (₹) | Rates | ₹20,00,000 |
Up to ₹2,50,000 | 0 | ₹0 - ₹3,00,000 | Nil | 0 | |
From ₹2,50,001 to ₹5,00,000 | 5% | ₹12,500 | ₹3,00,001 - ₹6,00,000 | 5% | ₹15,000 |
From ₹5,00,001 to ₹7,50,000 | 20% | ₹50,000 | ₹6,00,001 - ₹9,00,000 | 10% | |
From ₹7,50,001 to ₹10,00,000 | 20% | ₹50,000 | ₹9,00,001 - ₹12,00,000 | 15% | ₹45,000 |
From ₹10,00,001 to ₹12,50,000 | 30% | ₹60,000 | ₹12,00,001 - ₹15,00,000 | 20% | ₹60,000 |
From ₹12,50,001 to ₹15,00,000 | 30% | ₹75,000 | Above ₹15,00,000 | 30% | ₹1,50,000 |
Above ₹15,00,000 | 30% | ₹1,50,000 | |||
- | ₹3,97,500 | ₹3,00,000 | |||
Surcharge | Surcharge | Nil | |||
Health & Education Cess | ₹15,900 | Health & Education Cess | 4% | ₹12,000 | |
Tax Payable | ₹4,13,400 | Tax Payable | ₹3,12,000 |
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.
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If your total taxable income exceeds the maximum exempt amount, i.e., ₹2.5 Lakhs, filing an income tax return is mandatory. However, if your income is below ₹2.5 Lakhs filing ITR offers other benefits. For example, it becomes identity proof for you, proof of financial stability and status, proof of income, etc.
Yes, the new tax regime does not differentiate between taxpayers due to age. Thus, even for senior and super senior citizens, the limit of maximum tax-exempt income is ₹2.5 Lakhs only.
Yes, under the old regime of income tax slab, the rates only differ for taxpayers aged 60 to 80 and above 80. But the income tax slabs remain the same for all male and female taxpayers. The new income tax regime does not even differentiate between different age groups of taxpayers and offers the same income tax rates for all taxpayers.
You can claim a rebate under section 87A if your total taxable income after deductions is not more than ₹5 Lakhs. Also, this rebate is only available to resident individual taxpayers. This rebate is available to taxpayers under both old and new tax regimes.
The standard deduction under section 80TTA or 80TTB is not available under the new tax regime. The new tax regime offers a lower rate for income tax slabs. Thus, along with section 87A, the new tax regime offers lower tax liability than the old tax regime for all taxpayers.