When Can We Opt For New Income Tax Slab?

This blog talks about the new income tax regime with explained examples. Section 115 BAC discusses exemptions and deductions that are not claimable under the new law.

Latest Income Tax Slab and Rates – FY 2023-24 | AY 2024-25

The Income Tax Department has announced the latest income tax slab rates for FY 2023-24 (AY 2024-25). The new tax regime will come into effect from April 1, 2023, and the new income tax slabs and changes in rates will apply to incomes earned in FY 2023-24. Here are the income tax slabs under the new tax regime:

Income tax slabs for FY 2023-24 (AY 2024-25) under the new tax regime

The Budget for 2023 has introduced significant changes to the income tax slabs in the new tax regime, aiming to enhance its appeal to individual taxpayers. Notably, the basic exemption limit has been increased to Rs 3 lakh from the previous Rs 2.5 lakh.

It’s important to be aware that these modified income tax slabs under the new tax regime are set to be effective from April 1, 2023. These changes will impact incomes earned during the Financial Year 2023-24, commencing from April 1, 2023.

Income tax slabs under new tax regime for FY 2023-24

Changes announced in the new tax regime for FY 2023-24

The number of income tax slabs under the new tax regime has been reduced to five from six. The standard deduction of Rs. 50,000 has been introduced under the new tax regime for salaried and pensioners. Family pensioners can also claim a standard deduction of Rs. 15,000 under the new tax regime. The highest surcharge rate of 37% has been reduced to 25% under the new tax regime

Income tax slabs under the new tax regime till FY 2022-23 (AY 2023-24)

Income tax slabs in new tax regime till FY 2022-23

Income tax slab rates for FY 2023-24 (AY2024-25), FY 2022-23 (AY 2023-24), FY 2021-22 (AY 2022-23) under old tax regime

Income tax slabs for individuals under old tax regime

For individuals under the old tax regime, the income tax slabs for FY 2023-24 (AY 2024-25) are as follows:

Income tax slabs for senior citizens under old tax regime

Income tax slabs for super senior citizens under old tax regime

How to calculate income tax payable under new tax regime

Calculating net taxable income under new tax regime

To calculate the income tax payable under the new tax regime, you need to calculate your net taxable income. The net taxable income is calculated by subtracting the applicable deductions from your gross income. Once you have calculated your net taxable income, you can use the income tax slabs and rates to calculate the income tax payable

Net taxable income = Gross income – Deductions

Calculate your taxes easily with our income tax calculator ay 2023-24. Visit us online to use our online tax calculator today!

Calculation of income tax payable for taxable income of Rs 18.50 lakh

Here is a detailed breakdown of how to calculate income tax payable under the new tax regime using the given income of Rs 18,50,000:

1. Net Taxable Income: Rs 18,50,000
2. Income Exempt up to Rs 2,50,000: Rs 2,50,000 (Tax Amount: 0)
3. Income Chargeable to Tax: Rs 16,00,000
4. Income Tax Slab of Rs 2.5 Lakh up to Rs 5 Lakh: Rs 2,50,000 (Tax Amount: 5% of Rs 2,50,000 = Rs 12,500)
5. Income Chargeable to Tax: Rs 13,50,000
6. Income Tax Slab of Rs 5 Lakh up to Rs 7.5 Lakh: Rs 2,50,000 (Tax Amount: 10% of Rs 2,50,000 = Rs 25,000)
7. Income Chargeable to Tax: Rs 11,00,000
8. Income Tax Slab of Rs 7.5 Lakh up to Rs 10 Lakh: Rs 2,50,000 (Tax Amount: 15% of Rs 2,50,000 = Rs 37,500)
9. Income Chargeable to Tax: Rs 8,50,000
10. Income Tax Slab of Rs 10 Lakh up to Rs 12.50 Lakh: Rs 2,50,000 (Tax Amount: 20% of Rs 2,50,000 = Rs 50,000)
11. Income Chargeable to Tax: Rs 6,00,000
12. Income Tax Slab of Rs 12.50 Lakh up to Rs 15 Lakh: Rs 2,50,000 (Tax Amount: 25% of Rs 2,50,000 = Rs 62,500)
13. Income Chargeable to Tax: Rs 3,50,000
14. Income Tax Slab above Rs 15 Lakh: Rs 3,50,000 (Tax Amount: 30% of Rs 3,50,000 = Rs 1,05,000)
15. Total Income Tax Liability: Rs 2,92,500
16. Cess at 4% on Total Income Tax Payable: Rs 11,700
17. Final Income Tax Liability (Inclusive of Cess): Rs 3,04,200

How to calculate income tax liability under old tax regime

If you have chosen to follow the old tax regime for the current financial year, it’s essential to determine which income tax slab your income falls into. The applicable slab rate dictates the tax percentage at which your last earned rupee will be taxed.

Calculating net taxable income under old tax regime

Under the old income tax regime, individuals can utilize various deductions and tax exemptions to reduce their gross total income. After deducting eligible exemptions and deductions from the gross total income, you arrive at the net taxable income. It is this net taxable income on which you will compute the tax payable.

Here’s an example of how to calculate income tax payable under the old tax regime:

Imagine an individual under 60 years of age earns a gross total income of Rs 17 lakh in the current financial year, FY 2022-23. This individual has chosen the old tax regime for the year and qualifies for the following exemptions and deductions: section 80C up to Rs 1.5 lakh, section 80CCD(1b) for NPS investment of Rs 50,000, section 80D of Rs 25,000 for medical insurance premium, and section 80TTA of Rs 10,000 on savings account interest earned.

Calculation of income tax payable for taxable income of Rs 14.65 lakh

Here is a detailed breakdown of how to calculate income tax payable under the old tax regime using the given income of Rs 14,65,000:

1. Net Taxable Income: Rs 14,65,000
2. Income Exempt up to Rs 2,50,000: (Rs 2,50,000) – Tax: 0
3. Income Still Chargeable to Tax (Rs 14,65,000 – 2,50,000): Rs 12,15,000
4. Income Tax Slab of Rs 2.5 lakh and up to Rs 5 lakh: (Rs 2,50,000) – Tax: @ 5% = Rs 12,500
5. Income Still Chargeable to Tax (Rs 12,15,000 – 2,50,000): Rs 9,65,000
6. Income Tax Slab of Rs 5 lakh up to Rs 10 lakh: (Rs 5,00,000) – Tax: @ 20% = Rs 1,00,000
7. Income Still Chargeable to Tax (Rs 9,65,000 – 5,00,000): Rs 4,65,000
8. Income Tax Slab above Rs 10 lakh: (Rs 4,65,000) – Tax: @ 30% = Rs 1,39,500
9. Total Income Tax Liability: Rs 2,52,000
10. Cess at 4% on Total Income Tax Payable (i.e. on Rs 2,52,000): Rs 10,080
11. Final Income Tax Liability (Inclusive of Cess): Rs 2,62,080

This example provides a step-by-step calculation of income tax liability under the old tax regime for a given income of Rs 14,65,000. It’s important to note that the tax liability is calculated based on the applicable income tax slabs and rates.

How to know which income tax slab you fall in

To know which income tax slab you fall in, you can use the Income Tax Calculator provided by Vakilsearch. This online tool allows you to calculate your income tax for the assessment year 2023-24 (financial year 2022-23) based on the applicable tax slabs.

Surcharge on income tax

 Surcharge rate from April 1, 2023 under new tax regime

Surcharge rate under old tax regime

Income tax slabs for FY 2021-22 (AY 2022-23) FY 2022-23 (AY 2023-24) under new tax regime

Starting from April 1, 2020 (FY 2020-21), individuals have the flexibility to choose between the old tax regime, where they can claim various deductions and tax exemptions, or the new tax regime, which offers lower tax rates but without the deductions and exemptions. This optional choice allows individuals to decide based on their financial situation.

Below are the latest income tax slabs and rates applicable for FY 2021-22 (Assessment Year 2022-23) and FY 2022-23 (Assessment Year 2023-24). It’s important to understand these slabs and rates to make an informed decision about which tax regime to opt for.

Income tax rates and slabs in new tax regime for FY 2021-22, FY 2022-23

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