Income tax is the tax levied on the income earned by an individual through any source and hence is taxable in the eyes of the law if it passes the tax slab category limit. Many taxes, from local to national, are applicable on all levels and are considered one of the major sources of income for the Government of India. Let us walk through what taxes are and their types, offering our prime focus on the Income tax and how deductions are made on income earned above Rs. 5 lakhs, keeping in mind the old and new regimes.Read more
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Taxes are considered an obligatory contribution that every individual has to make who earns income in India in any form and falls under the tax slab category. Taxes are collected from the citizens of the country to upgrade the Indian economy and standard of living. They can be applicable only after the State Legislative or the Indian Parliament passes the law.
There are major 3 types of taxes applicable to the citizens of India, namely:
Both direct taxes and indirect taxes have many sub-categories and different implementations from one another that helps in avoiding double taxation problems.
Apart from the traditional direct and indirect taxes, there are other taxes too that are launched keeping specific agenda in mind by the Government of India. Other taxes are applicable on both direct as well as indirect taxes like Infrastructure Cess, Swachh Bharat Cess Tax, Krishi Kalyan Cess, etc.
Below mentioned are some of the main taxes levied by the Government of India on its citizens.
|Direct Taxes||Indirect Taxes||Other Taxes|
|Income Tax||Sales Tax||Property Tax|
|Wealth Tax||Goods & Services Tax (GST)||Professional Tax|
|Gift Tax||Value Added Tax (VAT)||Entertainment Tax|
|Capital Gains Tax||Custom Duty||Education Cess|
|Securities Transaction Tax||Octroi Duty||Toll Tax|
|Corporate Tax||Service Tax||Registration Fees|
Here is the overview of Income Tax Slab Rates for the Financial Year 2022 – 2023 (Assessment Year 2023 – 2024). It is important to note that significant changes were made in the Union Budget 2023 that was announced on 1st February 2023 and will be applicable from 1st April 2023.
The whole income tax slab structure and its associated tax rates are changed.
Taxpayers can continue with the old tax structure, or the new tax slab rates will be applicable by default.
Either the Old or the New tax regime can be followed for the payment of tax.
The tax rebate offered under Section 87A of the Income Tax Act, 1961, is increased from Rs. 12,500 to up to Rs. 25,000.
As per the new tax regime, an individual earning up to Rs. 7,00,000 (earlier Rs. 5,00,000) does not fall under the tax paying category, irrespective of the tax regime followed.
Once opted for a new tax regime, a taxpayer can never switch back to the old regime in their lifetime.
If no investments are made throughout the financial year, along with income not exceeding Rs. 7,00,000 (earlier, this limit was Rs. 5,00,000), an individual does not fall under the tax paying category.
Here is the list of sections that fall under the income tax category and the maximum claims an individual can make while filing the income tax return.
|Sections||Maximum Claim Limit|
|80 C||Rs. 1,50,000|
|80 CCC||Rs. 1,50,000|
|80 CCD||Rs. 1,50,000|
|80 CCF||Rs. 20,000|
|80 CCG||Regular Citizens: Rs. 25,000
Senior Citizens: Rs. 50,000
|80 D||Rs. 20,000|
|80 DD||Normal Disability: Rs. 75,000
Severe Disability: Rs. 1,25,000
|80 DDB||Senior Citizens: Rs. 1 lakh
Other than Senior Citizen: Rs. 40,000
|80 E||No limit|
|80 EE||Rs. 3 lakhs|
|80 GG||Rs. 2,000 per month|
|80 GGA||Depends on donation|
|80 GGB||Depends on donation|
|80 GGC||Depends on donation|
|80 IA||No limit|
|80 IAB||No limit|
|80 IB||No limit|
|80 IC||No limit|
|80 ID||No limit|
|80 IE||No limit|
|80 JJA||First 5 years' profits|
|80 QQB||Rs. 3 lakhs|
|80 RRB||Rs. 3 lakhs|
|80 TTA||Rs 10,000 per year|
|80 U||Normal Disability: Rs. 75,000
Severe Disability: Rs. 1,25,000
New income tax slab rates were introduced in the Financial Year 2022 – 2023 for AY 2023-24. It has given the option to individual taxpayers whether to go for the new income tax regime or continue with the old income tax regime. Here is the table with new tax rates as applicable to the annual income.
|Income Tax Slab||New Regime Income Tax Slab Rates for FY 2022 -2023
(Applicable on All Categories of Individuals & HUF)
|Up to Rs. 3 Lakhs||NIL|
|Rs. 3 lakhs to Rs. 6 lakhs||5% (tax rebate u/s 87A is available if income is less than Rs. 7 lakhs)|
|Rs. 6 lakhs to Rs. 9 lakhs||10%|
|Rs. 9 lakhs to Rs. 12 lakhs||15%|
|Rs. 12 lakhs to Rs. 15 lakhs||20%|
|Rs. 15 lakhs and above||30%|
The new income tax regime is the same for all the categories of individuals and HUFs, be they below 60 years or above 80 years of age.
Individuals earning equal to or less than Rs. 7 lakhs annually are eligible for tax rebates under Section 87A, making the tax liability NIL.
The exemption limit in the case of NRIs (Non-Resident Indians) is Rs. 2,50,000, irrespective of age.
A 4% health and educational cess is applicable to the income tax liability.
The cess and surcharge on income tax payable are applicable if the total income of the assessee exceeds the below-mentioned limits:
|Assessment Year 2022-23|
|Above Rs. 50 Lakhs but less than Rs. 1 Crore||10%|
|Above Rs. 1 Crore but less than Rs. 2 Crores||15%|
|Above Rs. 2 Crores but less than Rs. 5 Crores||25%|
|Above Rs. 5 crores but less than Rs. 10 Crores||25%|
|Above Rs. 10 Crores||25%|
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|Gross Total Income||Rs.12 lakh|
|Deductions under Section 80 and 80CCD||NIL|
|House Rent Allowance (HRA)||NIL|
|Medical and Travel Allowance||NIL|
|Taxable Income||Rs.12 lakh|
|Up to Rs.3 lakh||NIL|
|Above Rs.3 but less than Rs.6 lakh||Rs.15,000|
|Above Rs.6 lakh but less than Rs.9 lakh||Rs.30,000|
|Above Rs.9 but up to Rs.12 lakh||Rs.45,000|
The new Union Budget 2023 declares new tax slab rates applicable by default from 1st April 2023. Let us understand the significant changes brought in the income tax calculation for the FY 2022-23 (Assessment Year 2023-24) from the table below:
|Tax Rates (in %)||Previous Income Slabs for FY 2020-21 (Rs. in Lakhs)||New Income Slabs for FY 2022-23 (Rs. in Lakhs)|
|NIL||Rs.2.5 lakhs||Rs. 3 lakhs|
|5%||Rs. 2.5 lakhs- Rs. 5 lakhs||Rs. 3 lakhs- Rs. 6 lakhs|
|10%||Rs. 5 lakhs- Rs. 7.5 lakhs||Rs. 6 lakhs- Rs. 9 lakhs|
|15%||Rs. 7.5 lakhs- Rs. 10 lakhs||Rs. 9 lakhs- Rs. 12 lakhs|
|20%||Rs. 10 lakhs- Rs. 12.5 lakhs||Rs. 12 lakhs- Rs. 15 lakhs|
|25%||Rs. 12.5 lakhs- Rs. 15 lakhs||--|
|30%||Rs. 15 lakhs & Above||Rs. 15 lakhs & Above|
|Income Tax Slab||Old Tax Regime for FY 2019-20 (AY 20-21)||Previous Tax Regime for FY 20-21 (AY 21-22)|
|Resident Individuals, NRIs & HUF <60 years of age||Resident Individuals & HUF b/w 60-80 years of age||Resident Individuals & HUF >80 years of age||Applicable for All Individuals & HUF|
|Up to Rs. 2.5 lakhs||NIL||NIL||NIL||NIL|
|Rs. 2.5- 3 lakhs||5% (rebate on tax under Section87A)||NIL||NIL||5% (rebate on tax under Section87A)|
|Rs. 3-5 lakhs||5% (rebate on tax under Section87A)||NIL||NIL||5% (rebate on tax under Section87A)|
|Rs. 5-7.5 lakhs||20%||20%||20%||10%|
|Rs. 7.5-10 lakhs||20%||20%||20%||15%|
|Rs. 10-12.50 lakhs||30%||30%||30%||20%|
|Rs. 12.5-15 lakhs||30%||30%||30%||25%|
|Rs. 15 lakhs and above||30%||30%||30%||30%|
The new tax regime promises to encourage the whole spectrum of taxpaying individuals, as no liabilities are charged if the income earned annually is less than Rs. 7 lakhs. Also, for the High Net-worth Income (HNI) class earning annual income above Rs. 5 crores, the previous surcharge rates got reduced from 37% to 25%. With the due enforcement of the new tax regime, the benefits or the disadvantages will be analysed in the upcoming financial year.
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