Income Tax Slabs FY 2023-24

 

Quick glance at the latest Income Tax Slabs for FY 2023-24

Below is a tabular version of the latest income tax slabs applicable for individuals and HUF:

What is the Income Tax Slab?

Income Tax in India follows a tax slab system. Here, taxpayers’ income is categorised as ranges or slabs and certain tax rates are assigned to them. This is a progressive system of taxation where people earning more income are taxed at higher income tax slabs in proportion to their higher income.

By introducing income tax slabs in India, the Government of India aims to achieve a fair taxation system for all citizens. With this aim, the government revises the tax slabs periodically and announces amendments to the Union Budget accordingly.

Now that you know what income tax slabs are, let's take you through the different slabs under the old and new tax regimes for a better understanding.

For several years, many people purchased life insurance simply as a tax-saving method. The truth is, life insurance plays a crucial role in every sound financial plan. Before we create financial plans for the upcoming financial year, let’s better understand the new rules and regulations. In February 2023, the finance minister outlined the budget for the upcoming year, which included a few changes to the new tax regime. The finance minister reduced the number of tax slabs and extended the standard deduction to the salaried class and pensioners as well.

Let’s better understand the Income Tax slabs under Union Budget 2023.

1. New Income Tax Slabs as per Union Budget 2023:

NOTES:

• The tax rates in the new tax regime remain the same across all categories, i.e. the Hindu Undivided Family and individuals up to 60 years of age, senior citizens above 60 years to 80 years of age, and super senior citizens above 80 years. Therefore, no increase of the basic exemption limit will benefit the senior and the super senior citizens in the new tax regime.
• Individuals with a net taxable income of up to ₹ 7 lakh will be eligible for tax rebate u/s 87A under the new tax regime. The rebate limit remains at ₹ 5 lakh for individuals who choose to pay tax under the old regime.

2. Income tax slab rate for Old Tax Regime FY 2023-24:

The old tax regime differentiates between three age cohorts of tax-paying individuals.

Comparison of Tax Rates under New Tax Regime and Old Tax Regime for FY 2023-24 (AY 2024-25)

The table below will provide a comparative idea of new and old tax slabs for FY 2023-24

Old Tax Regime

This is the only tax regime that was prevalent before the introduction of the new tax regime in FY 2023-24.

● Income Tax Slabs for Individuals and HUF

New Tax Regime

The new tax regime has common tax rates for every individual and HUF taxpayer, unlike the old regime which differentiates taxpayers on the basis of their age. This regime was revamped in the Union Budget 2023. The new tax regime for FY 2023-24 is given below.

3. Surcharge rate for FY 23-24

*Health and Educational cess of 4% tax will be applicable on the sum of income tax liability and surcharges of all cases.

Exceptions for Surcharge Applicability

• The surcharge rates of 25% and 37% will not apply to income that is taxable under 2 these sections-

             Section 111A (Short Term Capital Gains on Shares)

             Section 112A (Long Term Capital Gain on shares) &

             Section 115AD [tax on income of FIIs (Foreign Institutional Investors)]

           Consequently, the highest surcharge applicable to these taxpayers will be 15%.

• Where the amount of surcharge on income tax payable exceeds the increase in income over the specified limit, concept of marginal relief kicks in.

The maximum rate of surcharge on tax payable on income from earnings as dividends or income from capital gains is 15%. Also, the surcharge for the Association of Persons (AOP) which comprises companies will be limited to 15%. These revised surcharged rates will be applicable for AY   2024-25.

Income Tax Slabs for Individuals below 60 years and HUF:

NOTES:

• The exemption limit of income tax is up to ₹ 2.5 lakh for all individuals, HUF and individuals below 60 years and NRIs for FY 2023-24.
• An additional 4% health and education cess is applicable on the tax amount.

Income Tax Slabs for Individuals aged between 60 years and 80 years :

NOTES:

• The exemption limit on income tax is up to ₹3 lakh for senior citizens for FY 2023-24.
• An additional 4% health and education cess is applicable on the tax amount.

Income Tax Slabs for Individuals above 80 years:

NOTES:

• The exemption limit on income tax is up to ₹5 lakh for super senior citizens for FY 2023-24.
• An additional 4% health and education cess is applicable on the tax amount.

Different Types of Taxable Income in India

To calculate income tax in India, the taxpayers’ sources of income are categorised into different groups. The five main heads of taxable income in India are as follows.

• Income from Salaries
  The income which an employee receives from an employer is categorised under this head. Even the pension a person receives after retirement is also categorised under this section. Form 16 carries every detail of your income from salaries. While filing your taxes, consider submitting this form as proof of your income and employment.
• Income from Business or Profession
  According to Sections 30 to Section 43D of the Income Tax Act, the income a person earns from sources like freelancing, business or professions is taxable under this head. Income from such professions or side hustles is categorised under this head.
• Income from House Property
  Any income that an individual makes by renting, leasing or selling a residential property is taxable by the Income Tax Act under this category.
• Income from Capital Gains
  This category considers the earnings that you make from sources like investments in capital assets. This can include mutual funds, real estate and stocks. This section also divides your capital gains into two major categories based on your holding period. These are long-term capital gains (LTCG) and short-term capital gains (STCG).
• Income from Other Sources
  Lastly, any income that does not fall under the above four categories is taxed as income from other sources. Examples of income sources that belong to this category are as follows.
  
• Gifts received from any TV show or programme
• Interests on FDs, saving bank accounts, etc
• Interests from securities, bonds and debentures
• Income from dividends
• Profits from gambling, horse races and lotteries
• Gifts from friends and families
• Pension a person receives after pensioner’s death
• Rental income from properties used for non-residential purposes

Important Points to Consider When Selecting the New Tax Regime

If you are planning to file your taxes following the income tax slabs under the new regime, you must make note of certain points. These are as follows:

• Under the new tax regime, an individual taxpayer will be unable to claim 70 tax deductions and exemptions available under the old regime. Individuals cannot claim popular deductions like Section 80C, Section 80D, HRA exemption, etc.
• The income tax slabs and interest rates mentioned under the new tax regime are the same for all individuals, senior and super senior citizens.
• Taxpayers with net taxable income less than or equal to Rs. 7 lakh can opt for a tax rebate under Section 87A.

Example of Old Tax Regime vs. New Tax Regime

To understand the tax calculations under income tax slabs let’s take a quick look at the following example.

Let’s assume that Mr Sinha is an individual taxpayer with a total taxable income of Rs. 40 lakh. This amount has been calculated by taking all income sources and necessary deductions into consideration.

Following this, Mr Sinha is eager to know his tax dues. However, before throwing light on this, here are a few important differences between new and old tax regimes which you must know.

• The new tax regime is considered better for individuals with less number of investments in tax-saving schemes.
• The old income tax slab offers more tax benefits to individual taxpayers with eligible investments and expenses.
• It is beneficial to analyse both tax slabs before choosing one as the perks of each regime might vary among individuals.

Now, here is an overview of Mr Sinha’s payable tax under the old and new regime.

Deductions and Exemptions Under the New Tax Regime

The old tax regime held provisions for several tax exemptions and deductions. Most of these deductions are not present in the new income tax slab regime. Some of the deductions that the new tax regime allows are as follows.

• Transport allowances for differently-abled individuals
• Travelling allowance for transfer or employment
• Any investment done in favour of the National Pension Scheme under Section 80 CCD (1) and Section 80 CCD (2)
• Deductions for new employees under Section 80 JJAA
• Any other deduction under Section 32 of the Income Tax Act
• Gratuity Amount under Section 10(10)
• Gifts up to Rs. 5000
• Employer’s contribution to employee’s EPS account
• Conveyance allowance
• Additional employee costs under Section 80 JJA
• Voluntary retirement exemption under Section 10(10C)

4. Surcharge for F.Y.2023-24:

Surcharge applicable as per tax rates are listed below across all categories mentioned above:

• 10% of Income Tax for income > ₹50 lakh
• 15% of Income Tax for income > ₹1 crore
• 25% of Income Tax for income > ₹2 crore
• 37%^* of Income Tax for income > ₹5 crore

The enhanced surcharge of 25% & 37%, as the case may be, is not levied, from income chargeable to tax under sections 111A, 112A and 115AD. Hence, the maximum rate of surcharge on tax payable on such incomes shall be 15%.

The maximum rate of surcharge on tax payable on dividend income or capital gain referred to in Section 112, shall be 15%. The surcharge rate for an Association of Persons (AOP) with all members as a company, shall be capped at 15%.

It is to be noted that relevant marginal relief from surcharge is available.

2023 Union Budget Personal Income Tax Highlights

• The standard deduction benefit of ₹ 50,000 is now extended to the salaried class and pensioners under the new regime.
• The new regime has become the default tax system. However, taxpayers can choose to continue to calculate and pay taxes as per the old regime.
• The highest surcharge levied on personal income tax has been reduced significantly from 37% to 25%.
• The leave encashment limit on retirement for non-governmental salaried employees has increased from ₹ 3 lakh to ₹ 25 lakh.
• Deduction from capital gains on investment in a residential house is now capped at ₹ 10 crore.
• Income from insurance policies (other than ULIP) having premium or aggregate of premium above ₹ 5, 00,000 in a year will be taxed. This income shall be taxable under the head “income from other sources”. Deduction shall be allowed for premium paid if such deduction is not claimed earlier under any other provisions of the Act. The new rule shall apply for policies issued on or after 1st April, 2023. However, the income is proposed to be exempt if received on the death of the insured person.

Frequently Asked Questions (FAQ)

1. Is filing income tax returns compulsory?

As per income tax laws, filing income tax returns is mandatory for individuals whose total income during the financial year exceeds the basic exemption limit of more than the gross total income of ₹ 2,50,000 under the old regime or ₹ 3,00,000 under the new regime. You will be attracting penalties by not filing returns. Also, it will hamper your chances of getting a loan, when you apply for a visa for travel purposes, or even property registration.

Do note that the exemption limit for an individual depends on his/her age. Citizens will have to inform the government mandatorily about income earned irrespective of the tax regime in Financial Year 2023-24.

2. Are there separate slab rates for different categories?

Individual taxpayers have to pay tax based on their age and income. For the financial year 2023-24, income tax slab rates are divided into the old regime, which has higher tax rates with three tax slabs and different deductions for senior and super senior citizens, and the revised new regime with lower tax rates.

3. Is there any standard deduction for FY 2023-24?

A standard deduction is a flat deduction of ₹ 50,000 to individuals earning a salary or pension income under the head "Salaries", irrespective of expenses or investments by the individuals. From FY 2023-2024, this deduction can be claimed under both regimes.

4. What is the 80C limit for 2023-24?

Section 80C is a popular section among taxpayers as it allows to reduce taxable income up to a maximum deduction of ₹ 1.5 lakh by making tax-saving investments like life insurance premium or incurring eligible expenses like school tuition fees which are available only for Individuals and HUFs. However, deduction is not allowed if the taxpayer opts for the new tax regime.

5. What are the Income tax slab rates under existing new regime and proposed new regime for FY 2023-24?

The Union Budget 2023 reduces the number of tax slabs under the new regime. We can compare the current new regime with the proposed new regime as follows:

6. How can individuals opt for the new tax regime? Understanding the exemption

Inclusions and exclusions
Taxpayers choosing to file tax under the new tax regime will have to forgo a few exemptions and deductions that were available in the existing old tax regime. Although there are 70 deductions and exemptions that taxpayers need to forgo, below are the most common ones:

7. What's not allowed under new tax rate regime?

a. Leave Travel Allowance (LTA) for salaried employees

b. House Rent Allowance (HRA)

c. Children education allowance

d. Helper allowance

e. Interest on housing loan (Section 24)

f. Other special allowances [Section 10(14)]

g. Professional tax

h. Donation to Political party/trust, etc

8. What's retained under new tax rate regime?

a. Retirement benefits, gratuity etc.

b. Conveyance allowance for expenditure incurred for travelling for duties of an office

c. Transport allowance for specially-abled people

d. Education scholarships

e. Retrenchment compensation

f. Investment in Notified Pension Scheme under section 80CCD(2)

g. Depreciation u/s 32 of the Income-tax act except additional depreciation.

9. Which entities are required to file income tax returns mandatorily?

As per the Income Tax Act, it is mandatory to file ITRs for these entities in India:

1. Individuals who want to claim an income tax refund

2. Those who want to set off and carry forward losses under a head of income

3. Individuals with assets or financial interests located outside of India

4. Individuals gaining income from property held under a trust for religious, charitable, or political purposes.

5. NRIs whose income accrued in India exceed ₹ 2.5 lakh

10. Is there any standard deduction for FY 2023-24?

Yes, the Income Tax Act allows a standard deduction of ₹ 50,000 to the income taxable under the head 'Salaries' for FY 2023-24.

Standard deduction is a tax benefit that can be claimed irrespective of the actual amount spent on Transport Allowance and Medical Allowance and is applicable to individuals earning a salary or pension income. The limit of standard deduction was set at ₹ 50,000.

11. What is the 80C limit for 2023-24?

The exemption under section 80C of the Income Tax Act can be availed of up to ₹1.5 lakh. Section 80C of the Income Tax Act, 1961, helps you save taxes on various investments and expenses you make during the financial year. Fixed Deposits in Bank, Public Provident Fund deposits (PPF), investment in National Pension Scheme (NPS), Employees Provident Fund (EPF) and Equity Linked Savings Schemes (ELSS) are some of the avenues open for you to avail of deductions under section 80C.

However, if you opt for the new tax regime announced in the Union Budget in 2020, Section 80C deductions claimed for provident fund contributions, life insurance premium, school tuition fee for children and various specified investments such as ELSS, NPS, PPF cannot be claimed.

12. Do I need to file an Income Tax Return (ITR) if my annual income is below Rs 2.5 lakh?

If your annual income is below Rs. 2.5 lakh, according to income tax slabs, the nil tax rate is applicable to you. Therefore, you don't need to file income tax returns or pay income tax.

13. Can you avail the standard deduction on a salary of Rs. 50,000 under the new tax regime?

As a salaried individual, you can avail a standard deduction of Rs. 50,000 by opting for the income tax slabs under the new regime.

14. Can we change tax regime every year?

Yes, Individual is allowed to switch between the old and the new regime as per Budget 2023.

15. Are there any conditions for opting New Tax Regime?

To be eligible for the lower income tax rates under the new regime, the following conditions must be met by the individual or HUF's total income:

• No business income is included.
• No exemptions or deductions from the Income Tax Act are taken into account.
• Losses, including carry forward and depreciation-related losses, are not offset.
• Capital losses from the sale of house property cannot be deducted.
• No exemptions or deductions for allowances or perquisites from any other law are taken into account.

ARN – ED/12/23/6791