According to the Income Tax Act of India, income tax is charged on every individual, HUF, partnership, LLP, and corporate income. If an individual’s income exceeds the minimum threshold level, they are subject to the slab system of taxation (known as the basic exemption limit of the Income Tax Rule for 2022-23).
1. What is a tax slab for income?
Individual taxpayers are subject to taxation under the Indian Income Tax based on a slab structure. Different tax rates are established for various income groups under a slab system. It indicates that when a taxpayer’s income rises, so do their tax rates. The nation benefits from having progressive and equitable tax systems thanks to this type of taxation. These income tax slabs routinely change with each budget. Depending on the category of taxpayer, these slab rates change. Three kinds of “individual” taxpayers under the income tax system include:
- Individuals under the age of 60, including residents and non-residents
- Residents who are seniors (60 to 80 years of age)
- Super old citizens that live there (aged more than 80 years)
2. For FY 2021–2022, Income Tax Slab Rates (AY 2022-23 )
Income tax slab rate under the new tax regime’s FY 2021–22 (AY 2022–23) Why is it not required?
The taxpayers’ options under this new system are:
- To continue paying taxes at the current tax rates, or to pay income tax at reduced rates under the new tax regime in exchange for giving up some allowable exemptions and deductions.
- By sticking with the previous system and paying tax at the current higher rate, the assessee is eligible for discounts and exemptions.
Income tax slab rate FY 2021-22 (AY 2022-23) – Applicable for New Tax regime
| Income Tax Slab | New Regime Income Tax Slab Rates FY 2021-22 (Applicable for All Individuals & HUF) |
|---|---|
| Rs 0.0 – Rs 2.5 lakh | NIL |
| Rs 2.5 lakh – Rs 3.00 lakh | 5% (tax rebate u/s 87a is available) |
| Rs 3.00 lakh – Rs 5.00 lakh | |
| Rs 5.00 lakh- Rs 7.5 lakh | 10% |
| Rs 7.5 lakh – Rs 10.00 lakh | 15% |
| Rs 10.00 lakhs – Rs 12.50 lakh | 20% |
| Rs 12.5 lakhs – Rs 15.00 lakh | 25% |
| > Rs 15 lakh | 30% |
Note-
Please take notice that under the new tax system, the tax rates are the same for all categories of individuals, including individuals and HUF under the age of 60, Senior Citizens above the age of 60 and under the age of 80, and Super Senior Citizens over the age of 80. Therefore, under the New Tax system, senior and super elderly persons will not receive the enhanced basic exemption limit advantage.
Individuals who qualify for a tax refund under Section 87A have net taxable incomes of less than or equal to Rs. 5 lakh, meaning that their tax obligations under the new and previous tax laws are zero.
No of their age, NRIs are only eligible for a basic exemption of Rs 2.5 lakh.
In every situation, an additional 4% Health and Education Cess will be applied to the income tax obligation. (up 4% from FY 18-19; formerly 3%)
Surcharges are applied to all of the aforementioned categories at the following tax rates:
- 10% of income tax if total income is greater than Rs. 50 lakh
- 15% of income tax is due if the total income exceeds Rs.
- 25% of income tax if total income is greater than Rs. 2 crore
- 37% of income tax if total income is greater than Rs. 5 crore
Income tax slab rate for Old Tax regime – FY 2020-21 (AY 2021-22)
Income tax slabs for individuals aged below 60 years & HUF
| Income Tax Slab | Individuals Below The Age Of 60 Years – Income Tax Slabs |
|---|---|
| Up to Rs 2.5 lakh | NIL |
| Rs. 2.5 lakh -Rs. 5 lakh | 5% |
| Rs 5.00 lakh – Rs 10 lakh | 20% |
| > Rs 10.00 lakh | 30% |
NOTE:
- The maximum amount of income tax that individuals, HUFs under 60 years old, and NRIs can avoid paying is Rs 2,50,000.
- The tax amount determined as above will be subject to an extra 4% health and education cess.
- if the total income is between Rs. 50 lakh and Rs. 1 crore, 10% of income tax.
- When the total income exceeds Rs. 1 crore, 15% of income tax.
Income tax slab rates for FY 2021-22 (AY 2022-23) – New tax regime & Old Tax regime
| Income Tax Slab | Existing Regime Slab Rates for FY 20-21 (AY 21-22) | New Regime Slab Rates for FY 20-21 (AY 21-22) | ||
|---|---|---|---|---|
| Resident Individuals & HUF < 60 years of age & NRIs | Resident Individuals & HUF > 60 to < 80 years | Resident Individuals & HUF > 80 years | Applicable for All Individuals & HUF | |
| Rs 0.0 – Rs 2.5 lakh | NIL | NIL | NIL | NIL |
| Rs 2.5 – Rs 3.00 lakh | 5% (tax rebate u/s 87a is available) | NIL | NIL | 5% (tax rebate u/s 87a is available) |
| Rs 3.00- Rs 5.00 lakh | 5% (tax rebate u/s 87a is available) | NIL | ||
| Rs 5.00 – Rs 7.5 lakh | 20% | 20% | 20% | 10% |
| Rs 7.5 – Rs 10.00 lakh | 20% | 20% | 20% | 15% |
| Rs 10.00 – Rs 12.50 lakh | 30% | 30% | 30% | 20% |
| Rs 12.5 – Rs 15.00 lakh | 30% | 30% | 30% | 25% |
| > Rs 15 lakh | 30% | 30% | 30% | 30% |
Conditions for opting New Tax regime.
The taxpayer who chooses the new tax regime’s concessional rates will have to give up some of the exemptions and deductions that were previously accessible. There are a total of 70 deductions & exemptions that are prohibited, with the following list of the most popular ones:
List of common Exemptions and deductions “ not allowed” under the New Tax rate regime
- Leave Travel Allowance (LTA)
- House Rent Allowance (HRA)
- Conveyance allowance
- Daily expenses in the course of employment
- Relocation allowance
- Helper allowance
- Children education allowance
- Other special allowances [Section 10(14)]
- Standard deduction on salary
- Professional tax
- Interest on housing loan (Section 24)
- Deduction under Chapter VI-A deduction (80C,80D, 80E, and so on) (Except Section 80CCD(2))
List of deductions “allowed” under the new Tax rate regime
- Transport allowance for specially-abled people
- Conveyance allowance for expenditure incurred for traveling to work
- Investment in Notified Pension Scheme under section 80CCD(2)
- Deduction for employment of new employees under section 80JJAA
- Depreciation u/s 32 of the Income-tax act except for additional depreciation.
- Any allowance for traveling for employment or on transfer
Which is better, the old tax system or the new tax system, of ncome Tax Rule for 2022-23, with an example?
Middle-class taxpayers who have taxable incomes up to Rs 15 lakh can gain greatly from the new tax system. For people with high incomes, the old regime is preferable.
People who make small investments will benefit from the new income tax system. Anyone paying taxes without claiming tax deductions can benefit from paying a reduced rate of tax under the new tax system as it offers seven lower-income tax bands. For example, under the former method, an assessee with a total income before deductions of up to Rs. 12 lakh will have a larger tax burden if they have investments worth less than Rs. 1.91 lakh. Consequently, if you put less money into tax-saving plans.
However, if you already have a financial strategy for building wealth in place—one that includes investing in tax-saving products, purchasing life and health insurance, paying for children’s tuition, making EMI payments on student loans, purchasing a home with a mortgage, and other wealth-building activities—the old regime will benefit you because it offers higher tax deductions and lower tax outlays.
If taxpayers desire to choose the lower tax rates, they can compare both tax regimes in light of the aforementioned factors as well as the new income tax system. Due to the fact that it might differ from person to person, it is advised to do a comparative assessment and analysis under both regimes before selecting the most advantageous one.
Mr. Rahul earns a salary of Rs. 10 lakh each year. His entire investment under Section 80C is Rs. 1.7 lakh, which is split between ELSS, PF, LIC premiums, and house loan principal payments. Additionally, he pays Rs 28,000 for medical insurance for himself and his wife. The aforementioned deductions are accessible if he chooses the old tax system; but, if he chooses the new tax system, they are not. He has paid Rs 75,000 in house loan interest during FY 2020–21.
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