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The income tax slabs are applicable as per the net taxable income. Income tax is a tax levied on the net taxable income of a person. A person, here, includes an individual, Hindu Undivided Family (HUF), Association of person (AOP), Body of Individuals (BOI), a firm and a company. 

Income tax in India is levied under the Income tax Act, 1961. Every year, the Finance Minister puts forth the Finance Bill in Parliament. The bill when passed by both the houses of the Parliament and along with the President’s assent results in the formation of the Income-tax act. The slabs and rates applicable for the current assessment year are specified in the first schedule of the Finance Act.

What is an Income Tax Slab in India?

Income Tax in India is levied on the individual taxpayer on the basis of a slab system which is nothing more than a separate category according to the age of the taxpayer. The income tax rate in India under the existing regime is mentioned below:

  • Resident Individuals below 60 years of age,
  • Non Resident Individuals below the age of 60 years
  • Resident senior citizens above 60 years of age but less than 80 years of age
  • Resident super-senior citizens above 80 years of age

The income tax levied and paid by the individual would depend on the slab under which he/she is falling. We will be covering the income-tax rate for FY 2022-23 (the assessment year 2023-24)

Income Tax Slabs AY 2023-24 for Resident Individuals

Budget 2020, provides an opportunity to choose between a new-tax regime or continue with the old-tax regime. The tax rate for FY 2022-24 is different on the basis of the regime chosen by the individual. You can use Scripbox’s income tax calculator and estimate the tax liabilities under the old as well as new tax regime. Our income tax calculator is a simple and easy to use online tool. 

Let us discuss the applicable slabs and rates in a detail.

Income Tax Slabs Rate – FY 2022-23 AY 2023-24 New Regime and Old Regime

Income SlabOld Regime Slab RatesNew Regime Slab Rates
Individuals < 60 years of ageIndividuals > 60 to < 80 yearsIndividuals > 80 yearsIndividuals & HUF
Upto Rs 2.5 lakhNILNILNILNIL
Rs 2.5 – Rs 3 lakh5%NILNIL5%
Rs 3 – Rs 5 lakh5%5%NIL5%
Rs 5 – Rs 7.5 lakh20%20%20%10%
Rs 7.5 – Rs 10 lakh20%20%20%15%
Rs 10 – Rs 12.50 lakh30%30%30%20%
Rs 12.5 – Rs 15 lakh30%30%30%25%
> Rs 15 lakh30%30%30%30%

Note:

if the net annual income is under 5 lakh, rebate under section 87A is allowed and is limited to Rs. 12,500. This means that if the total tax liabilities is less than Rs.12,500, no tax is required to be paid.

The amount of tax payable by an individual as per the above slab rate will be increased by health and education cess on income tax of 4%

Furthermore, the above slab rate in India comes with a few restrictions. An individual has to let go of tax benefit or tax benefit and tax exemption to opt for the new tax regime. Like an individual taxpayer cannot claim deductions under section 80C, section 80D, section 80E etc

Below are the tax exemption & deductions which the taxpayer has to give up:
  • House Rent Allowance (HRA)
  • Leave Travel Allowance (LTA)
  • Conveyance Allowance
  • Helper Allowance
  • Relocation Allowance
  • Standard deduction
  • Professional Tax
  • Special Allowance
  • Interest on housing loan allowed under section 24
  • Deductions under Section 80C, Section 80D, 80E, etc. However deductions under Section 80CCD(2) can still be claimed.

The option to choose between the new and the old tax regime should be exercised before the due date of filing of income tax returns.

The tax calculated as per the above income tax slab rates will be increased by a health and education cess on income tax of 4%. Furthermore, a tax rebate under section 87A is allowed to an individual taxpayer up to a maximum of Rs. 12,500 for individuals having net annual income of Rs. 5,00,000. The taxpayers can claim this tax rebate while filing income tax returns.

Learn: Income Tax For Senior Citizens

Old Vs New Tax Regime – Which is Better?

Since the income tax slab and tax rate is different for taxpayers, the resulting tax payable amount differs under each option. Moreover, under the new tax regime, the taxpayer cannot claim certain allowances and tax deductions. Hence, it is crucial to plan your taxes and select the option wisely. The following illustration explains how to calculate the tax payable under each tax regime.

Details of Income earned During the Year and Investments Made

ParticularsAmount
Income From SalaryRs 9,00,000
Investment in ELSSRs 1,50,000
HRA to be ClaimedRs 1,00,000
Interest on Housing LoanRs 2,00,000

Computation of Net Tax Payable Under Both Tax Regimes

ParticularsOld Tax RegimeNew Tax Regime
Gross SalaryRs 9,00,000Rs 9,00,000
HRARs 1,00,000NA
Standard DeductionRs 50,000NA
Net SalaryRs 7,50,000Rs 9,00,000
Less: Tax Deductions
Section 80C- ELSSRs 1,50,000NA
Section 24- Interest on Housing LoanRs 2,00,000NA
Taxable IncomeRs 4,00,000Rs 9,00,000
Tax Payable
Upto Rs 2.5 lakhNilNil
Rs 2.5 – Rs 3 lakhRs 2,500Rs 2,500
Rs 3- Rs 5 lakhRs 5,000Rs 10,000
Rs 5 – Rs 7.5 lakhNilRs 25,000
Rs 7.5 – Rs 10 lakhNilRs 22,500
TotalRs 7,500Rs 60,000
Less: Tax Rebate u/s 87ARs 7,500Nil
Tax PayableNilRs 60,000

From the above illustration, it is evident that the new tax regime will be beneficial if there are less or no tax deductions available. On the other hand, the old regime is beneficial when the taxpayer has allowances, and deductions to claim. 

Associations of Persons, Bodies of Individuals and Other Artificial Judicial Persons

Before moving on to the taxation part, let us first understand what AOP, BOI and other Artificial Judicial persons are:

Association of person:

In general, whenever persons join together for a common purpose and action and their object is to produce income. This association will be considered as an association of person for the purpose of income tax in India. A person in AOP could be a company or an individual person. The term person could include any association, body of individuals, or company, irrespective of whether it is incorporated or not. 

Body of Individuals:

The body of individuals denotes the status of persons like executors or trustees who merely receive the income jointly and who may be assessable in the same manner as the beneficiaries are assessed individually. Thus, in the case of BOI, only individuals can join with the intention of earning some income.

Artificial judicial person:

This would cover every artificial judicial person not covered elsewhere. For example, a deity would be assessed under the income tax act under an artificial judicial person.

Now that we know a bit of the above categories, let’s talk about their taxation.

Below are the applicable income tax rates to the above categories of persons:
Share of profit of members is unknownShare of profit of members is known
Tax will be levied at the maximum marginal rate. However, if any of the members of the AOP or BOI are taxed at a rate higher than the maximum marginal rate, then the AOP or BOI will be taxed at that higher rate.A) The total income of any member (excluding the share from AOP/BOI)exceeds the minimum exemption limit: AOP/BOI’s will be taxed at the maximum marginal rate.
B) No member has total income (excluding the share from AOP/BOI)exceeding the minimum exemption limit: AOP/BOI taxed at the rates applicable to an individual.
In both the above cases, the amount of the income tax calculated will be increased by a surcharge as per the below table:
Total Taxable IncomeSurcharge Rate
Total income is greater than Rs, 50,00,000 but less than Rs. 1,00,00,00010%
Total income is greater than Rs, 1,00,00,000 but less than Rs. 2,00,00,00015%
Total income is greater than Rs, 2,00,00,000 but less than Rs. 5,00,00,00025%
Total income is greater than Rs, 5,00,00,000 37%

Partnership Firm’s, LLP & Local Authority:

In the case of partnership firms and LLP, every firm is liable to pay tax @30% plus surcharge on income tax. This applicable surcharge is 12% if the net income is above Rs. 1 crore. along with a health and education cess of 4%.

Taxation of Companies:

A company, as per the income-tax act, can be divided amongst two categories, a domestic 

Domestic Company:

A domestic company means an Indian company, which has been formed under the Companies Act 2013, or the erstwhile Companies Act 1956 and has its registered office in India.

Domestic companies can further be divided into two groups:

  • Closely-held companies
  • Widely-held companies

For both categories of companies, taxation will be based on the below criteria:

If the company opts to be taxed as per the old income tax regime:
Total IncomeTax Rate
a) If the total turnover or gross receipts of the previous year 2018-19 does not exceed Rs. 400 croreb) In all other cases25%
30%
Certain manufacturing domestic companies opting to be taxed under section 115BA.Note: Conditions mentioned under 115BA(2) are to be satisfied, such as deductions and incentives are disallowed.a) The company has been registered and set-up on or after  01.03.2016.b) Company is engaged in the business of manufacturing of any article or thing.c) The total income shall be computed without considering the deductions u/s 10AA, 32AC, 32AD etc.25%
Applicable Surcharge under old income tax regime:
Total Income of the domestic companySurcharge Rate
Total income is greater than Rs, 1,00,00,000 but less than Rs. 10,00,00,0007%
Total income is greater than Rs, 10,00,00,000 12%

Health and Education Cess on Income Tax:

Health and Education Cess to be levied @4% on income tax amount inclusive of surcharge.

If the company opts to be taxed as per the new regime as per section 115BBA

Total IncomeTax Rate
a) If the total turnover or gross receipts of the previous year 2018-19 does not exceed Rs. 400 croreb) In all other cases
Note: Conditions specified under section 115BAA are to be satisfied. No deductions and incentives are to be allowed

22%

The surcharge is applicable @10% irrespective of the fact whether the total net income is less than or more than 1 crore. This will be further increased by a Health & Education Cess of 4%.

If the company opts to be taxed as per the new regime as per section 115BAB
CriteriaTax Rate
Below are the conditions that need to be satisfied in order for the domestic company to opt for this section:
a) The domestic company should be a manufacturing entity set up and registered on or after 01.10.2019b) The manufacturing business should be commenced on or before 31.03.2023c) The company should not be engaged in any business other than the business of manufacturing.d) The total income of the company has been computed without considering the deductions u/s 10AA, 32AD, 33AB, etc.

25%

The surcharge is applicable @10% irrespective of the fact whether the total net income is less than or more than 1 crore. This will be further increased by a Health & Education Cess of 4%.

Foreign Company:

For the purpose of the income-tax act, a foreign company means a company which is not a domestic company. A foreign company is taxed at a rate of 40% plus surcharge. Furthermore, a surcharge of 2% shall be levied if the total net income of the company exceeds Rs. 1 crore but less than Rs. 10 crores.

If the total net income exceeds Rs. 10 crores, a surcharge of 5% is levied on the total net income. This is further increased by a Health and Education Cess of 4%. This is levied on the income tax (inclusive of surcharge).

Frequently Asked Questions

Is it mandatory to opt for the new tax regime?

No, it is not mandatory to opt for the new tax regime. Moreover, the income tax department will not automatically choose a tax regime for the taxpayer. The taxpayer must select which tax regime is most suitable and opt for it accordingly.

Can I claim a section 80C deduction under the new tax regime?

No, tax deduction section 80C is not applicable under the new tax regime.

Are income tax returns different under the new regime?

No, the income tax return is not different under the new tax regime. Moreover, the only difference under the new tax regime is the tax slab and related deductions.

Are income tax slabs different for different age groups of taxpayers?

Yes, the income tax slab is different for different age groups of taxpayers. The tax slab is different for taxpayers within 60 years of age, between 60 and 80 years of age, and above 80 years of age.

Recommended Read: Form 13 in Income Tax