Income tax is computed in India using income tax slabs and rates depending on the applicable financial year (FY) and assessment year (AY). In the Union Budget 2022-23, the income tax slab for FY 2023-24 was made public. Individual taxpayers are required to pay income tax in accordance with their tax slab. Depending on their income, people’s tax brackets may be higher or lower. Hence, persons with greater income will be obliged to pay more taxes. The slab system was implemented to achieve equity within the framework of the nation’s tax system. The brackets are modified each time a new budget is announced.
During The Financial Years 2023-24, India Has The Following Income Tax Slabs:
The minister of finance, advocated many adjustments to the income tax bands in Budget 2023 in compliance with the new tax system. Changes have been made to the new tax structure to make it more palatable to individual taxpayers. A taxpayer[1] with taxable income of Rs. 7.5 lakh who would have paid Rs. 39,000 in income tax during the present financial year would not be required to pay any income tax during the next financial year. Thus, the new tax structure results in an income tax decrease of Rs 39,000.
The Following Is A List Of The Most Significant Modifications That Have Been Made To The New Tax Structure:
- In accordance with the new tax structure, the basic exemption threshold has been increased from Rs. 2.5 lakh to Rs. 3 lakhs.
- Under the new tax system, the maximum surcharge rate was reduced to 25% from 37%.
- With the new tax system for wage earners and retirees, a standard deduction has been included.
- The income tax slabs have been reduced from six to five under the new tax system.
- Under the new tax structure, the Section 87A reimbursement for taxable income has been doubled from Rs. 5 lakhs to Rs. 7 lakhs. Beginning in FY 2023-24, persons with taxable earnings up to Rs 7 lakh who opt for the new tax system will virtually pay no taxes.
- Taxpayers would be required to select the new tax system but, a person may choose to preserve the prior tax structure.
Income Tax Slab
The tables below demonstrate the Revised Income Tax Slabs, which have replaced the previous tax system. The new tax brackets are shown in the table below.
| Income Tax Slab | Rates |
| Rs. 3,00,000 and under Rs. 3,00,000 | No tax |
| Rs. 300,000 to Rs. 6,00,000 | 5% on income above Rs. 3,00,000 |
| Rs. 6,00,000 to Rs. 900,000 | Rs 15,000 + 10% on income above Rs 6,00,000 |
| Rs. 9,00,000 to Rs. 12,00,000 | Rs 45,000 + 15% on income above Rs 9,00,000 |
| Rs. 12,00,000 to Rs. 1500,000 | Rs 90,000 + 20% on income above Rs 12,00,000 |
| Above Rs. 15,00,000 | Rs 150,000 + 30% on income above Rs 15,00,000 |
Income Tax Slab For People Between 60 To 80 Years Is Different From The Tax Imposed As Mentioned In The Above Table.
| Income Tax Slabs | Rates |
| Rs. 3 lakhs | NIL |
| Rs. 3 lakhs to Rs. 5 lakhs | 5.00% |
| Rs. 5 lakhs to Rs. 10 lakhs | 20.00% |
| Rs. 10 lakhs and above | 30.00% |
Income Tax Slab for Senior Citizens, (Who Are Above 80 Years of Age):
| Income Tax Slabs | Rates |
| Up to Rs. 5 lakhs | NIL |
| Rs. 5 lakhs to Rs. 10 lakhs | 20.00% |
| Above Rs. 10 lakhs | 30.00% |
Tax Slabs For Domestic Companies Vary From Tax Slab Of The Salaried Persons:
| Particulars | Old Tax Rates | New Tax Rates |
| Company that opts for section 115BAB and is registered on or after October 1, 2019 and has started its operations since 31st March 2023 | – | 15% |
| Company opting for Section 115BAA. Their income is calculated without any deductions. | – | 22% |
| Company opts for section 115BA registered on or after March 1, 2016, and manufactures any article without deduction. | – | 25% |
| Where a company’s Turnover is less than Rs. 400 crores in the previous year | 25% | 25% |
| Any Domestic Company other than the above. | 30% | 30% |
- A 7% surcharge is paid when a company’s taxable income surpasses Rs. 1 crore.
- If your total income exceeds Rs.10 crores, the income tax rate that you would be subject to is 12%.
- Domestic companies that make the appropriate election under Sections 115BAA and 115BAB are subject to an income tax rate of 10%.
- Added Health and Education Cess Rate – 4% s Income Tax Rate for Partnership Firms and Limited Liability Partnerships Under the Old/New Regime
- A partnership or an LLP is subject to a tax rate of thirty percent.
- A 12% surcharge is applied to incomes above Rs. 1 crore.
- The Health and Education Cess Rate is 4% under the New Income Tax System.
The Tax Rates For Individuals and HUFs under the New Tax Framework Are As Follows:
| Slab | New Tax Regime (till 31st March 2023) | New Tax Regime (From 1st April 2023) |
| Up to Rs. 2,50,000 | NIL | NIL |
| Rs. 2,50,000 – Rs. 3,00,000 | 5% | NIL |
| Rs. 3,00,000 – Rs. 5,00,000 | 5% | 5% |
| Rs. 5,00,000 -Rs. 6,00,000 | 10% | 5% |
| Rs. 6,00,000 -Rs. 7,50,000 | 10% | 10% |
| Rs. 7,50,000 -Rs. 9,00,000 | 15% | 10% |
| Rs. 9,00,000 -Rs. 10,00,000 | 15% | 15% |
| Rs. 10,00,000 – Rs. 12,00,000 | 20% | 15% |
| Rs. 12,00,000 – Rs. 12,50,000 | 20% | 20% |
| Rs. 12,50,000 – Rs. 15,00,000 | 25% | 20% |
| Above Rs. 15,00,000 | 30% | 30% |
Surcharges as per Tax Rates
Surcharges are applied in accordance with the tax rates shown below for each of the following categories:
- If your annual income is more than Rs. 50 lakhs, you would be required to pay an additional income tax of 10%.
- You must pay income tax at a rate of 15% if your total income exceeds Rs. 1 crore.
- If you have an annual income that is more than Rs.2 crore, you will be subject to an income tax that is 25% higher than the standard rate.
- If your total income reaches Rs.5 crore, you must pay 37% income tax.
Under the New Tax Regime, the maximum surcharge rate, which was 37% in the Budget for 2023, has been decreased to 25%. (Intended to take effect on April 1, 2023).
Under What Tax Bracket Are You In?
To calculate the amount of income tax that is owing for a certain financial year, it is necessary to have an understanding of where one’s income sits on the tax scale. The individual’s choice of income tax scheme for the particular financial year will also be a consideration. The amount of income tax that will be necessary under each tax system will be compared when deciding which tax system to use.
One must first determine their taxable income in order to discover the income tax slab and rates that apply to them. A person who is still subject to the previous income tax system may claim tax exemptions (such as the Home Rent Allowance exemption, Travel Allowance exemption, and the basic deduction) and all other deductions mentioned under sections 80C to 80U. When calculating a person’s taxable income, it is necessary to take into account any exemptions and deductions to which the individual is entitled.
Income Tax Surcharge
If a person’s net taxable income is more than a certain level, they will be subject to a surcharge. Prior to the cess’ introduction, the surcharge is applied to the total amount of income tax that is owing. If a person’s taxable income exceeds Rs 50 lakh, they must pay a surcharge.
The new tax system was introduced by the government in Budget 2023 with a number of new surcharge rates. During the financial years 2023-24, the revised surcharge rates will take effect on April 1, 2023.
|
Surcharge rate as under new tax regime |
|
|
Up to Rs 50 lakh |
Nil |
|
More than Rs 50 lakh but up to Rs 1 crore |
10% |
|
More than Rs 1 crore but up to Rs 2 crore |
15% |
|
More than Rs 2 crore |
25% |
However, individuals opting for the old tax regime in FY 2023-24 will continue to pay the surcharge rate they were paying in the previous financial years.
|
Surcharge rate under old tax regime |
|
|
Up to Rs 50 lakh |
Nil |
|
From Rs 50 lakh to Rs 1 crore |
10% |
|
From Rs 1 to Rs 2 crore |
15% |
|
From Rs 2 crore to Rs 5 crore |
25% |
|
Income above Rs 5 crore |
37% |
There are a few variances to the charge amounts that were previously specified. The maximum surcharge that an individual will be subjected to in the event that they have realized capital gains (either short-term or long-term) as a result of the sale of stock shares and equity mutual funds or through dividend income is capped at 15%. This is the case regardless of which income bracket the individual falls into.
The concept of marginal relief is necessary background knowledge for surcharge. When an individual’s annual income is over a predetermined limit, the government may choose to provide financial help in the form of a more favorable tax rate.
Calculating the income tax that is owing on Rs. 50 lakhs will help estimate the necessary amount of marginal deduction that has to be taken. This is the circumstance that has arisen due to the fact that a surcharge would not be applied till the income surpassed Rs. 50 lakhs. The amount of income tax that must be paid is Rs 13, 12,500. Now you need to add any income that is above Rs. 50 lakh to the total amount of income tax that is owed.
In order to determine the accurate amount of income tax that must be paid in addition to the surcharge, it is necessary to begin by contrasting the typical tax obligation (prior to the surcharge and cess) with the tax liability that is left after taking into account any marginal tax relief. Only then can the accurate amount of income tax that must be paid in addition to the surcharge be determined (without cess)
For The Financial Years 2021–2022, The Income Tax Rates Are As Follows Under The New Tax System, FY 2022–2023:
Taxpayers will have the option, beginning on April 1, 2020 (the beginning of the financial year 2020-21), of continuing to operate under the current tax system (under which they will be able to claim deductions and tax exemptions) or converting to the new tax regime (under which they will not be able to operate) (under which they will not be able to do so). The previous tax system is being replaced with a new one that offers a tax rate that is lower than the previous one.
Some Examples of Taxable Income in India
The Following Are Some Examples Of Taxable Income In India:
- Business Income
Businesses are required to pay taxes on their taxable net income. This tax is determined by either the expected or actual revenue that may be generated by the profession or company. Having said that, this step isn’t taken until after the adjustments to the allowable deductions have been made.
For the financial year 2022-23, different tax rates will be applied to the income of individuals as well as businesses that are corporations. Individuals who file their taxes as a corporation will be subject to the income tax slabs and rates that are in effect for the fiscal year 2023–2024.
- Salary or Pension
In this part of the world, it is common practice for individuals’ “base pay,” “allowances,” and “salary profit” to have tax payments withheld from them. When an individual reaches retirement age, their pensions are treated like any other source of income and are thus taxable. The age of the individual who is receiving a salary or pension during the financial year 2022-23 causes the income tax bracket rates to fluctuate. These rates are in effect for the financial year 2022-23.
- Real Estate Income
A straightforward way to increase your income is to own many houses and rent them out. Yet, under some conditions, the income of the tenant is regarded to be taxable income. This demonstrates that you are required to pay income tax on this amount based on the income tax bracket rates that will be in effect for the financial year 2022-2023.
- Income From Capital Gains
The selling of an asset such as gold, real estate, mutual fund units, stocks, bonds, or other assets may result in capital gains, which are a kind of income. Other types of assets that can result in capital gains include stocks and bonds. It is possible to categorize the gain as either a long-term or a short-term capital gain based on the features of the asset in question as well as the profits it has created over the course of time. Each of these classifications have their advantages and disadvantages.
Even though these earnings are subject to income taxes, the regulations of capital gains tax for 2022-23 and the income tax slabs for 2023-24 are not the same. This is despite the fact that these profits are taxable.
- Lottery, Horse Racing, and Increased Income
In India, a tax is levied on winnings from lotteries, horse races, and other activities of a similar kind. Nevertheless, these gains are subject to a separate taxation under the laws that are in effect right now, rather than being included in the income bracket rates that will be in effect for FY2022-23.
Differences between the Old and New Regimes
In the financial year 2020-21, a new tax system was designed in addition to the current old tax regime. In FY 2022-23 (AY 2023-24), tax payers will have the chance to pick one of these income tax systems and will be accountable for paying taxes in line with their choices.
There are primarily two income tax schemes in India:
- To begin, the new tax system features more tax bands and lower tax rates than the previous one. Owing to this, the income tax rates for FY 2022-23 fluctuate depending on whether you vote for the new or old tax system.
- Second, if you adopt the new tax regime, you will no longer be able to take advantage of any of the significant deductions and exemptions that were available under the old tax system. These include provisions such as Section 80C, Section 80D, and many more.
Conclusion
By investing in, saving for, or spending money on certain financial instruments, taxpayers may be able to lower the amount of income that is subject to taxation via the use of tax deductions and exclusions.
While the income tax bracket rates for AY 2023-2024 are going to be lower than they were under the previous system, the new tax regime will only permit a very limited number of exemptions and deductions. This is because the old system allowed for a larger number of them.
In contrast, the previous tax system allowed taxpayers to claim up to seventy deductions or exclusions in order to lower their taxable income and the amount of income tax that they were required to pay in the financial year 2022-2023. These deductions and exclusions allowed taxpayers to reduce their taxable income and the amount of income tax that they were required to pay.
Also Read:
Income Tax Regime 2023- 2024
