Income Tax Slab FY 2023-24 and AY 2024-25

by Annie

The Interim Budget will be announced on 1st February, 2024. Usually, when the budget is presented, changes in the Income Tax system can be announced. Since this budget is a Vote on Account, it is unlikely that any significant changes in taxation will be included, even if there is a lot of Income Tax Expectations from Union Budget. Regardless, it is necessary to understand the current taxation system in India, especially after the new tax regime was introduced in last year’s Union Budget.

What is the Income Tax Slab?

The Income Tax Slab refers to the categorization of individual taxpayers based on their annual income, determining the applicable tax rates. The slab system ensures a progressive tax structure where individuals with higher incomes pay a higher percentage of their earnings as taxes. To put it simply, people who earn more are taxed at higher income tax slabs in proportion to their higher income. This system aims to maintain a fair taxation system for every citizen. The government periodically revises the tax slabs and announces amendments to the Union Budget.

In February 2023, the finance minister announced a few changes to the new tax regime in the budget. The primary changes were – a reduction in the number of tax slabs and an extension of the standard deduction to salaried people and pensioners.

Latest Income Tax Slab for FY 2023-24

The new tax regime has common tax rates for every individual and HUF taxpayer, unlike the old one, which differentiates taxpayers based on age. This regime was revamped in the Union Budget 2023.

The income tax according to the new regime is as follows-

Income Tax Slab Income Tax Rates as per the new regime
< 3 lakh No Tax
3 to 6 lakh 5%
6 to 9 lakh 10%
9 to 12 lakh 15%
12 to 15 lakh 20%
> 15 lakh 30%

 Comparison between old and new tax regime

Taxable Income Old Tax Regime New Tax regime
Up to Rs. 2.5 lakh Exempted Exempted
Greater than 2.5- 3 lakh 5% Exempted
Greater than 3- 5 lakh 5% 5%
Greater than 5-6 lakh 20% 5%
Greater than 6-9 lakh 20% 10%
Greater than 9-10 lakh 20% 15%
Greater than 10-12 lakh 30% 15%
Greater than 12-15 lakh 30% 20%
Above 15 lakh 30% 30%

New vs. Old Tax Regime

The old and new tax regimes represent different approaches to taxation. Here’s a detailed breakdown of their differences:

  1. Tax Slabs and Rates: The old regime has multiple income tax slabs with varying rates, ranging from 5% to 30%, depending on the income level. The new regime offers reduced, flat tax rates across income slabs, providing simplicity.
  2. Deductions and Exemptions: Taxpayers under the old regime are eligible for various deductions and exemptions under sections like 80C (investment in specified instruments), 80D (health insurance premiums), 24(b) (home loan interest), and others. Under the new regime, 70 deductions and exemptions are not applicable.
  3. Rebates: The old regime offers flexibility in claiming deductions based on individual financial planning, which can help reduce taxable income. Rebates available in the old regime, such as Section 87A for individuals with income up to a specified limit, are not applicable in the new regime.
  4. Form Filing: Taxpayers need to choose from ITR-1 to ITR-7 forms based on their income sources and complexity. The new regime uses a simplified ITR form, making the filing process more straightforward.

Important Points to Consider When Selecting the New Tax Regime

Here are some points you might take into account before selecting the new regime:

  1. As discussed in this article before, under the new tax regime, taxpayers cannot claim 70 tax deductions and exemptions available under the old regime. Taxpayers cannot claim deductions like HRA, Section 80C investments, Section 80D, etc.
  2. Under the new tax regime, the income tax slab rates are the same for all individuals- even senior and super-senior citizens.
  3. An important rebate under the new regime is that a taxpayer with net taxable income less than or equal to₹ 7 lakh can opt for a tax rebate under Section 87A.

 Deductions and Exemptions under the New Tax Regime

Most of the deductions available in the old tax regime are absent in the new regime. However, some deductions allowed in the new tax regime are as follows-

  1. Investment made in the National Pension Scheme under Section 80 CCD (1) & (2)
  2. Deductions under Section 32 of the Income Tax Act
  3. Gratuity Amount under Section 10 (10)
  4. Employer’s contribution to the employee’s EPS account
  5. Travelling allowance for transfer or employment
  6. Conveyance allowance
  7. Voluntary retirement exemption under Section 10 (10c)

In conclusion, the Income Tax Slab reflects the ongoing efforts to streamline taxation and promote economic growth. With careful consideration of income brackets and corresponding tax rates, the updated slab aims to strike a balance between revenue generation and providing relief to taxpayers. Understanding the taxation system will help one make informed decisions if any changes are announced in the upcoming Budget for AY 2024-25.

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