Tax calculations are pretty taxing! And confusing. We sure agree. And we can’t say it will be super simple if you want to figure it out manually, but we can simplify it further. And that’s precisely what we’re here to do with the topic of income tax slabs.
What is an income tax slab?
An income tax slab is a classification of taxpayers based on income. Every individual is classified in one of the many tax brackets. The categorization indicates the percentage of tax people falling within one category must pay. Therefore, those with higher wages are legally required to contribute a bigger proportion of their earnings to the government.
The tax slab system was developed to level the playing field for all taxpayers. With each new budget plan, the tax slab is inevitably revised. You can learn about the new income tax slabs in the section below.
Old income tax slabs for FY 2023–24
In India, since 2020, we have had two taxation regimes. Any taxpayer can opt for other of them. The first is the subject of discussion in this section. The table below shows the modified old income tax slabs and rates applicable to FY 2023–2024.
|Income Tax Slab||Individuals Below The Age Of 60 Years – Income Tax Slabs|
|Up to ₹2.5 lakh||NIL|
|₹2.5 lakh -₹5 lakh||5%|
|₹5 lakh – ₹10 lakh||20%|
|> ₹10 lakh||30%|
New income tax slabs for FY 2023–24
The table below shows the modified new income tax slabs and rates applicable to FY 2023–2024.
Income tax slab rates for individuals
In India, for the current financial year, the tax slab rates applicable to individuals under the new regime are as follows.
New Tax Regime
After Budget 2023
₹0 – ₹2,50,000
₹2,50,000 – ₹3,00,000
₹3,00,000 – ₹5,00,000
₹5,00,000 – ₹6,00,000
₹6,00,000 – ₹7,50,000
|₹7,50,000 – ₹9,00,000||
₹9,00,000 – ₹10,00,000
₹10,00,000 – ₹12,00,000
₹12,00,000 – ₹12,50,000
|₹12,50,000 – ₹15,00,000||
Table 1: Income tax slabs and rates for individuals
However, as mentioned before, you can choose the old taxation regime if that suits your needs better.
The differences between the new tax regime and the old tax regime
The tax slabs are fixed in the new tax regime and determine your tax liability. But if you opt for the old regime, you could calculate your taxes differently. Under it, you can make various investments or financial commitments and seek deductions and exemptions. With these deductions and exemptions, it may be possible for you to fall under a lower slab, so a lower tax rate applies to you.
Here’s how the appropriate tax rates operate under both regimes:
Old Tax Regime Slab Rates
Resident Individuals & HUF
New Tax Regime Slab Rates
|< 60 years of age||> 60 to < 80 years||> 80 years||Before Budget 2023||After Budget 2023|
|₹3,00,000-₹5,00,000||5%||5% (tax rebate u/s 87A is available)||NIL||5%||5%|
Table 2: Income tax in the old regime vs. the new regime
Pros of the new tax regime (as applicable from 1 April 2023)
- Simplification of the tax system: The introduction of the new tax regime has simplified the tax system in India by eliminating the system to tax deductions and exemptions. This will make filing taxes easier and less cumbersome for taxpayers and easier to manage for the government.
- Lower taxes: The new tax regime has significantly reduced the overall tax burden on individuals and businesses by introducing a lower rate of taxation for lower-income groups. This leads to an increase in disposable income and thus encourages people to invest in the economy.
- More money for taxpayers: The new tax regime has also increased the threshold limit for income tax exemption. Under the new tax regime in India, there is a full tax rebate for individuals earning up to ₹7 lakhs. This is significantly higher than the ₹5 lakhs of the old tax regime.
Cons of the new tax regime (as applicable from 1 April 2023)
- Confusing: The new tax regime of India currently coexists with the old regime. While the intention may be to simplify tax filing, in the short term, it may lead to errors, which can attract penalties from the government.
- Limited scope for savings and investments: The new regime discourages certain long-term savings and investment options as they are no longer eligible for tax benefits. This may reduce the incentive for individuals to save and invest.
Pros of the old tax regime
- Taxpayers can claim various exemptions, such as HRA and LTA, which can significantly reduce their tax liability.
- Tax-saving investments, such as PPF, NSC, and others, can be claimed as deductions, providing an additional avenue for tax savings.
- The standard deduction of taxable income up to ₹50,000 is available, which taxpayers can claim.
- Other deductions and exemptions, such as depreciation and loan interest, can also reduce their tax liability.
Cons of the old tax regime
- The tax slabs are complex and have a higher tax rate than the new regime.
- The filing of taxes is a more complicated affair because of the various documentary proofs required.
- The compliance burden is higher, as taxpayers must maintain proper records of all deductions and exemptions claimed.
- The tax-saving investments may have a lock-in period, meaning taxpayers cannot withdraw the money before a specified time.
Choosing between the old and new tax regimes
Deciding which tax regime works for you can be a bit tricky. Each regime may have different implications based on your income bracket. Here are some simple points to consider.
When to opt for the old tax regime:
- Sticking with the old regime might be beneficial if you have several deductions and exemptions to declare. The point is to see if you can reduce your non-taxable income.
- If you are comfortable with the tax structure and don’t want to deal with the complexities of a new regime, it may make sense to opt for the old regime.
When to opt for the new tax regime:
- If you don’t have many deductions and exemptions, and your income falls in one of the lower tax brackets, the new regime could result in lower tax liability.
- If you prefer a simpler tax structure with fewer tax slabs and surcharges, the new regime would be a good fit for you.
However, taxpayers cannot change tax regimes during a financial year. If you revert to the older tax system, you may switch to the new system at any point.
Slab rates for domestic companies under the old regime
Under the old tax regime in India, domestic companies were subject to a progressive tax structure based on their annual taxable income. The slab rates for domestic companies under the old regime were as follows:
- For companies with an annual taxable income of up to ₹1 crore, a flat tax rate of 25% is applicable.
- For companies with an annual taxable income exceeding ₹1 crore, a tax rate of 30% applies.
These slab rates determined the amount of tax payable by domestic companies under the old tax regime in India.
New tax regime slab rates for domestic companies: FY 2022–23
Domestic companies have a different taxation system as opposed to individuals. The table below should give you a fair idea about it.
|S.No||Type||New Regime Tax rates|
|1||The company appoints section 115 BAB, incorporated on or after 1 October 2019, but has begun production by 31 March 2023.||15%|
|2||Business opts for Section 115 BAA, which calculates a firm’s total revenue without deducting certain reductions, bonuses, and exemptions, including extra depreciation.||22%|
|3||Business elects section 115BA if it is formed on or after 1 March 2016 and is involved in the manufacturing of every good. As indicated in the subsection clauses, no deduction request has indeed been filed.||25%|
|4||If a firm’s 2018–19 revenue was less than ₹400 crore, it is exempt from the minimum tax.||25%|
|5||Anyone another domestic firm||30%|
Table 3: The income tax rate for a Partnership firm or LLP per the old/new regime.
A partnership/LLP is taxed at 30%. A 12% surcharge is also paid on earnings over ₹1 crore. A 4% Health and Education Cess is levied. No concessional charges exist for companies or LLPs under the new tax structure.
How to calculate income tax from income tax slabs
You need first to calculate your net taxable income. Once you have done that, apply the tax slab to determine how much of your salary goes to the government. The following steps should help you do it:
- Identify the tax bracket applicable to your taxable earnings.
- Calculate the sum of tax owing for the lowest tax bracket(s) in which you fall.
- Calculate your tax liability based on your tax bracket.
- Add the tax amounts computed in steps 2 and 3 to get the overall tax owed.
In India, people are taxed at different rates depending on their yearly income. Salaried persons may deduct ₹50,000 from their tax slab under the standard deduction in the new tax regime. Partnerships and LLPs pay 30% income tax. Contact a tax specialist to choose the tax approach that works better for you.
What are the income tax slabs for FY 2022–23?
The income tax slab for individuals in India (in the financial year 2022–2023) hasn’t been changed. Previously, in the new tax regime, it ranged from 0% to 30% with a standard deduction of ₹50,000. The new tax regime exemption and deductions list is available in the old one.
Which slab is better for income tax?
Income and resources matter. Lower-income taxpayers should pay less tax. There are no choices in the matter.
What is the tax slab rate in India in 2023?
For the financial year 2021–22 (Assessment Year 2022–23), under the new regime, individual taxpayers under 60 pay 0% tax for income up to ₹2.5 lakh, 5% for income between ₹2.5–5 Lakh, 10% for income between ₹5–7.5 lakh, 15% for income between ₹7.5–10 lakh, 20% for income between ₹10–12.5 lakh, 25% for income between ₹12.5–15 lakh, and 30% for income above ₹15 lakh.
What is the income tax slab for FY 2023-24?
The income tax slab for FY 2023-24 varies based on income levels. For individuals with taxable income above ₹50 lakh up to ₹1 crore, the tax rate is 10%, and for income above ₹1 crore up to ₹2 crore, it’s 15%. For more details, refer to official government sources.
How to save tax on 12 lakhs salary?
To save tax on a 12 lakh salary, consider utilizing Section 80C deductions, exploring Section 80D for health insurance premiums, and optimizing House Rent Allowance (HRA) among other tax-saving strategies. Consult financial experts for personalized advice.
Which tax slab is better?
The choice of the better tax slab depends on your income and financial situation. Consult a tax advisor to determine which slab suits you best based on your taxable income.