New Income Tax Slabs FY 2023-24 (AY 2024-25) & FY 2022-23 (AY 2023-24)

With the new financial year coming up, it is important to stay updated with the latest changes in the income tax laws and regulations. In this article, we'll be discussing the 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. The Indian Government has introduced the New Regime Tax Rates for the financial year 2023-24 (Assessment Year 2024-25) and the old regime tax rates still apply for the financial year 2022-23 (Assessment Year 2023-24). In this article, we'll be explaining the key differences between the two regimes and the tax slab rates for both the financial years.

In India, income tax is calculated based on the taxable income of an individual. The taxable income is calculated after deducting the applicable exemptions and rebates from the total income earned. The government has divided the taxable income into different slabs and has set different tax rates for each slab.

Key Differences between the New and Old Regime Tax Rates

The New Regime Tax Rates for the financial year 2023-24 (Assessment Year 2024-25) have been introduced with several key differences when compared to the old regime tax rates for the financial year 2022-23 (Assessment Year 2023-24). Let's take a look at the key differences between the two regimes.

• The new regime offers lower tax rates for individuals who are willing to forgo exemptions and deductions.
• The new regime does not provide for several exemptions and deductions that were available under the old regime.
• The new regime has a simpler tax structure with fewer tax slabs and lower tax rates.
• The new regime aims to increase the tax base and simplify the tax compliance process for individuals..

Income tax slab for FY 2022-23

Let’s start with the tax slabs for individuals till the age of 60 years for the financial year 2022 -2023 or Assessment year 2023-2024. Here we will also see the prevailing tax slabs for both the old and new regimes. This will help you also analyse which regime will be suitable for your income level.

For people aged up to 60 years - Income Tax Slabs for FY 2022-2023 (AY 2023-2024)

So, as you can see in the above table, the income tax rates under the old regime are only 3 which is 5% for taxable income between Rs. 250001 to Rs. 5 lakhs is 5% and then 20% for income between Rs. 500001 to Rs. 10 lakhs and then above Rs. 10 lakhs it is 30%. While under the new tax regime, there is more segregation.

Now let’s see the other two tax slab categorisation for people aged over 60 years but less than 80 years and above 80 years.

60 years to 80 years (Senior citizen) - Income Tax Slabs for FY 2022-2023 (AY 2023-2024)

80 years and above (Super Senior Citizen) - Income Tax Slabs for FY 2022-2023 (AY 2023-2024)

So, from the above two tables, it is pretty clear, that under the new regime of income tax, there is no special provision for senior and super-senior citizens. While the old regime offers a high exemption limit for senior and super-senior citizens.

New Tax Slabs for New Tax Regime effective from 1st of April, 2023

The Union Budget for 2023-24 was presented on the 1st of February. While the above-mentioned old tax regime is still the same, there are changes in the new tax regime.

As per the new tax regime, the slabs are as follows :

The updated new tax regime is now the default tax regime, however, if you want to avail of the deductions, then you have to go by the old tax regime only.

Standard Deductions & Tax exemptions as per the updated new tax regime

The standard deduction available under the updated new tax regime is Rs. 50000 up to an annual income of Rs. 15 lakhs, however, if the income is above Rs. 15 lakhs, then the assessee will get a standard deduction of Rs. 52500 instead of Rs. 50000.

Under this updated new tax regime, the tax exemption has also been hiked from Rs. 5 lakhs to Rs. 7 lakhs. As per section 87A, if the income of the assessee is less than equal to Rs. 7 lakhs, then the tax paid by them will be refunded and only people having income above Rs. 7 lakhs have to pay taxes as per tax slabs.

One thing to remember here is that this tax exemption is only available if you are opting for the new tax regime. It is not available under the old tax regime. So, if you are opting for the old tax regime, then if your income is above Rs. 5 lakhs, then you cannot avail of tax exemption under section 87A.

Types of Taxable income in India

Income tax is levied on individuals, corporations, trusts, HUFs and others. The sources of income for these taxpayers are varied and thus taxable income in India is calculated considering five broad heads of income which are :

• Income from salary or pension :
  The taxable income takes into account the basic salary, allowances and any other profit made from the salary that an individual received. Pension is also included under this head of income as that is an extension of salary after the retirement of the employee. This is one of the most important heads of income when it comes to income tax computation.
• Income from business :
  For individuals who are into business or self-employed professionals, the income they generate from their profession has to be included in income from the business head. The incomes which need to be included are profits earned from selling certain licenses, profits made from business in a certain financial year, any profit that an individual makes on his income from the business, any monetary benefits that the business receives from that individual, any cash received under any government scheme for export from the business, and any profit share, salary, bonuses received as a partner in any business firm.
• Income from house property :
  If you have any property which you have rented out and earn rental income from the same, then that income would be included under your income for tax calculation. Under this here, both commercial and residential properties are considered and if you have more than one self-occupied property, then except for one, all others will be taken into consideration for rental income computation, if they have been rented out.
• Income from capital gains :
  The fourth head of income which you need to take into account for calculating taxable income for FY 2022-2023 is any profit that you have generated by selling or transferring any asset which was held as an investment like stocks, bonds, or properties, gold or other.
• Income from other sources :
  Apart from the above-mentioned four heads of income, if you have any other income then according to section 53 (2) of the IT Act, those income needs to be taken into consideration under this category. It usually includes any income generated from gambling, bank deposits, sports rewards, lottery or card games, and others.

Income Tax Deductions

Talking about income tax deductions, there is an entire list of seventy-plus deductions that are available for income taxpayers. While some of these deductions are specific for a certain type of income taxpayer like a salaried individual, or business professional, then the others are for all assessees. The most important deductions which can help you save your taxes as well as help build a secure financial future include the deductions available under section 80. Let’s see the most important deductions available under section 80 :

• 80 C :
  As per this section of the IT Act, if you have invested in investment vehicles such as LIC, PPF, EPF, ELSS, NSC, ULIP and other investment vehicles of similar nature.
• 80 CCC :
  Under this section, if you are paying any amount for annuity pension plans then that is deductible from your income.
• 80 CCD (1) :
  If you pay towards NPS then that amount will be eligible for deduction. However, the maximum deduction can be the least of the following :
  • 20% of the gross salary received by self-employed
  • 10% of the gross salary received by a salaried employee
  • Total deduction allowed under section 80 C/CCC/ CCD - Rs. 1.5 lakh

Important: Here the three sections mentioned above, that are 80 C, 80 CCC and 80 CCD (1) have a maximum deduction limit of Rs. 1.5 lakhs combining three sections. This means if you exhaust the limit of Rs. 1.5 lakhs for investments under section 80 C, then even if you are eligible for 80 CCC or 80 CCD(1), you cannot deduct those amounts from your income.

• 80 CCD (1B) :
  If you deposited any amount into the National Pension Scheme account then you are eligible for an additional deduction of a maximum of Rs. 50000 under this section. This is a newly-added subsection to the IT Act.
• 80 D :
  Under this section, you can be eligible for a deduction for the amount you pay towards any health insurance scheme of your spouse, dependent children and yourself. You can get up to Rs. 25000 deductions under this section. If you have parents for whom you have also taken an insurance policy then you can get an additional Rs. 25000 deduction (maximum). In case the assessee is a senior citizen, then the maximum amount eligible for deduction becomes Rs. 50000. Also, under this section, you can get a deduction of Rs. 50000 for senior citizens only if you haven’t paid for any health insurance premium for them. The total deduction that you can claim under this section is Rs. 1 lakh.
• 80 EE :
  Under this section, you can claim a deduction for the interest amount paid on your home loan or any loan availed for acquiring a residential property. The maximum allowable deduction is Rs. 50000.
• 80 EEA :
  In case, you have availed a loan for acquiring residential property but are not eligible for an 80 EE deduction, then under this section, you can claim a deduction up to Rs. 1.5 lakhs on the interest payable on the loan.
• 80 G :
  If you have donated any amount to any registered charitable organisation, then you can get 100% or 50% of the amount donated as a deduction from your income.
• Standard Deduction for a salaried individual :
  If you are a salaried employee or a pension holder, then will get a standard deduction of Rs. 50000 on your total income.
• Standard deduction for rental income :
  There is another standard deduction of 30% which applies to the rental income you generate.
• Section 24 :
  While sections 80 EE and 80 EEA offer deduction on interest payable on the home loan, that is only after exhausting the limit of Rs. 2 lakhs under this section 24. If you have a self-occupied property for which you are paying interest on the home loan, then up to Rs. 2 lakhs every year you can claim as a deduction.

For more deductions and exemptions, you can refer to our article on Income Tax deductions.

Income tax calculation for FY 2022-23

So, now you know which income you need to add and the deductions you can avail of, so now let’s see how to calculate income tax. We will here calculate tax payable under both the old income tax regime and the new income tax regime. To calculate the income tax, let’s take an example.

Supposedly, you are employed with ABC organisation and draw a salary of Rs. 15 lakhs per annum. You have invested in an ELSS plan where you have a monthly SIP of Rs. 5000. You also have a health insurance plan for your family which includes your spouse, dependent child and self. For this insurance, you pay a premium of Rs. 30000 semi-annually. You have recently purchased a flat for which you have taken a home loan and the total interest paid during FY 2022-2023 towards this loan is Rs. 125000. You have another house from which you get a rental income of Rs. 10000 every month.

Health & Education cess

After you derive the tax payable amount, you need to add a 4% Health & Education cess on the same.

Now, let’s first calculate the taxable income under both the tax regime

So, as you can see in the table above, under the old income tax regime, you will be eligible for the deductions while if you opt for the new tax regime, then you will not be able to use the deductions. That said, it doesn’t mean that the new income tax regime is not worthy enough. If you fall into the higher tax bracket, then this regime can be helpful. However, the standard deduction is applicable for both old and new income tax regimes.

So, now we have got the taxable income, let’s see the tax payable under both tax regimes on this amount.

As you can see, the total tax payable under the section old tax regime is Rs. 218088 while under the new tax regime, it is Rs. 205608 even without any deductions apart from the standard deductions. Thus, if you fall under the higher tax bracket, it is wise to opt for the new tax regime while people who have an annual income below Rs. 12 lakhs, should opt for the older one provided they are eligible for deductions.