New Income Tax Slabs FY 2023-24 (AY 2024-25) & FY 2022-23 (AY 2023-24) – New & Old Regime Tax Rates for FY 2023-24 & FY 2022-23

Budget 2023 New Income Tax Regime

Income tax is levied on the income earned by all the individuals, HUF, partnership firms , LLPs and Corporates as per the Income tax Act of India. In the case of individuals, tax is levied as per the slab system if their income is above the minimum threshold limit (known as basic exemption limit ).

1. What is income tax slab ?

Indian Income tax levies tax on individual taxpayers on the basis of a slab system. Slab system means different tax rates are prescribed for different ranges of income. It means the tax rates keep increasing with an increase in the income of the taxpayer. This type of taxation enables progressive and fair tax systems in the country. Such income tax slabs tend to undergo a change during every budget.These slab rates are different for different categories of taxpayers. Income tax has classified three categories of “individual “taxpayers such as:

• Individuals (aged less than of 60 years) including residents and non-residents
• Resident Senior citizens (60 to 80 years of age)
• Resident Super senior citizens (aged more than 80 years)

2. Income Tax Slab Rates for FY 2022-23 (AY 2023-24 )

a. Income tax slab rate for FY 2022-23 (AY 2023-24), New Tax regime – Why is it optional?

In this new regime, taxpayers has an OPTION to choose either :

1. To pay income tax at lower rates as per New Tax regime on the condition that they forgo certain permissible exemptions and deductions available under income tax, Or
2. To continue to pay taxes under the existing tax rates.The assessee can avail rebates and exemptions by staying in the old regime and paying tax at the existing higher rate.

Difference of tax slab rates between New tax regime vs Old Tax regime 

NOTE:

Please note that the tax rates in the New tax regime is the same for all categories of Individuals, i.e Individuals & HUF upto 60 years of age, Senior citizens above 60 years upto 80 years , and Super senior citizens above 80 years. Hence no increased basic exemption limit benefit will be available to senior and super senior citizens in the New Tax regime.

Individuals with Net taxable income less than or equal to Rs 5 lakh will be eligible for tax rebate u/s 87A i.e tax liability will be nil of such individual in both – New and old/existing tax regimes.

Basic exemption limit for NRIs is of Rs 2.5 Lakh irrespective of age.

Additional Health and Education cess at the rate of 4 % will be added to the income tax liability in all cases. (increased from 3% since FY 18-19)

Surcharge applicable as per tax rates below in all categories mentioned above:

10% of Income tax if total income > Rs.50 lakh

15% of Income tax if total income > Rs.1 crore

25% of Income tax if total income > Rs.2 crore

37% of Income tax if total income > Rs.5 crore 
*In Budget 2023, the highest surcharge rate of 37% has been reduced to 25% under the new tax regime. (applicable from 1st April 2023)

b. Income tax slab rate for Old Tax regime – FY 2022-23 (AY 2023-24)

d. Conditions for opting New Tax regime.

The taxpayer opting for concessional rates in the New Tax regime will have to forgo certain exemptions and deductions available in the existing old tax regime. In all there are 70 deductions & exemptions that are not allowed, out of which the most commonly used are listed below:

f. Example for Old Tax regime Vs New Tax regime & which is better?

The new tax regime can largely benefit middle class taxpayers who have a taxable income upto Rs 15 lakh. Old regime is a better option for high-income earners.

The new income tax regime is beneficial for people who make low investments. As the new regime offers seven lower income tax slabs, anyone paying taxes without claiming tax deductions can benefit from paying a lower rate of tax under the new tax regime. For instance, assessee having total income before deduction up-to Rs 12 lakh will have higher tax liability under the old system if they have investments less than Rs 1.91 lakh. Therefore, if you invest less in tax-saving schemes, go for the new regime.

That being said, if you already have in place a financial plan for wealth creation by making investments in tax-saving instruments; mediclaim and life insurance; making payments of children’s tuition fees; payment of EMIs on education loan ;buying a house with a home loan; and so on, the old regime helps you with higher tax deductions and lower tax outgo.

In light of the above and considering the new income tax regime, if taxpayers want to opt for the concessional tax rates, they may evaluate both regimes. Hence, it is advisable to do a comparative evaluation and analysis under both regimes and then choose the most beneficial one as it may vary from person to person.

Let’s take an example of comparing the Old & New tax regime of an assessee with Rs 10 Lakh income.

Mr. Rahul has a salary income of Rs 10 lakh. His total investment u/s 80C is Rs 1.7 lakh under ELSS, PF, LIC premium and principal installment of home loan. Further he pays Medical insurance for himself and his wife of Rs 28,000. If he opts for the old tax regime, then he can claim the above deductions, however if he wishes to go for a new tax regime than these deductions will not be available. He has paid home loan interest of Rs 75,000 in FY 2020-21. Let us see the tax outflow in both the regimes.

As per illustration above, if the gross income is more than Rs 10 lakh or and deductions u/S 80C, 80D, and 24(b) of the Income Tax Act are availed , then older regime is more beneficial from tax planning standpoint. While for individuals in the middle-income group, earning a gross income of say Rs 5 lakh; the new tax slab regime may prove advantageous.

g. Time of Selection of option of ols vs new regime?

h. New Tax regime Slab rates for domestic companies – FY 2022-23.

*Please refer to the new sections for checking the applicability for above concessional income tax rates.

Additional Health and Education cess at the rate of 4 % will be added to the income tax liability in all cases.

• Surcharge applicable for companies is as below:
  1. 7% of Income tax where total income > Rs 1 crore
  2. 12% of Income tax where total income > Rs.10 crore
  3. 10% of income tax where domestic company opted for section 115BAA and 115BAB

i. Income tax rate for Partnership firm or LLP as per old/ new regime.

A partnership firm/ LLP is taxable at 30%. 
* 12% Surcharge is levied on incomes above Rs 1 crore. Health and Education cess at the rate of 4 % Note- There are no concessional rates introduced for firms / LLPs in nex tax regime.

3. Income Tax Slab Rates for FY 22-23

Difference of tax slab rates between New tax regime vs Old Tax regime 

NOTE:

Please note that the tax rates in the New tax regime is the same for all categories of Individuals, i.e Individuals & HUF upto 60 years of age, Senior citizens above 60 years upto 80 years , and Super senior citizens above 80 years. Hence no increased basic exemption limit benefit will be available to senior and super senior citizens in the New Tax regime.

Individuals with net taxable income less than or equal to Rs 5 lakh will be eligible for tax rebate u/s 87A i.e tax liability will be nil of such individual in both – New and old/existing tax regimes.

Basic exemption limit for NRIs is of Rs 2.5 Lakh irrespective of age.

Additional Health and Education cess at the rate of 4 % will be added to the income tax liability in all cases. 

Surcharge applicable as per tax rates below in all categories mentioned above:

10% of Income tax if total income > Rs.50 lakh

15% of Income tax if total income > Rs.1 crore

25% of Income tax if total income > Rs.2 crore

37% of Income tax if total income > Rs.5 crore

b. Income tax slab rate for Old Tax regime

4. Income tax slab rates for FY 2021-22

5. Income Tax Slab Rates for FY 2018-19

6. Income Tax Slab Rates for FY 2017-18