The latest budget for 2023 has introduced some significant changes to the income tax slabs in the new tax regime, aimed at making it more appealing to individual taxpayers. One of the key changes is the increase in the basic exemption limit, which has been raised from Rs 2.5 lakh to Rs 3 lakh.
It’s important to note that these new income tax slabs in the new tax regime will become effective from April 1, 2023. Furthermore, the new income tax slabs and the rate changes will apply to incomes earned during FY 2023-24, starting from April 1, 2023.
The income tax slab rates for the financial year 2023-24 (the assessment year 2024-25) have been proposed in Budget 2023. The following table summarizes the tax rates applicable to various categories of persons:
|Category||Income Range||Tax Rate|
|Individuals (Resident & Non-Resident)||Up to Rs. 3,00,000||Nil|
|Rs. 3,00,001 to Rs. 6,00,000||5%|
|Rs. 6,00,001 to Rs. 9,00,000||10%|
|Rs. 9,00,001 to Rs. 12,00,000||15%|
|Rs. 12,00,001 to Rs. 15,00,000||20%|
|Above Rs. 15,00,000||30%|
|HUFs and AOPs||Up to Rs. 2,50,000||Nil|
|Rs. 2,50,001 to Rs. 5,00,000||5%|
|Rs. 5,00,001 to Rs. 10,00,000||20%|
|Above Rs. 10,00,000||30%|
|Companies (Domestic)||Turnover up to Rs.400 crore in FY22-23*||25%|
|Companies (Foreign)||Turnover up to Rs.400 crore in FY22-23*||25%|
*Note: The turnover limit of INR 400 crore is applicable for companies having a turnover of up to INR 250 crore in the previous year.
Several changes have been introduced in the new tax regime to enhance its attractiveness:
1. The new income tax regime becomes the default tax regime, meaning that unless an individual specifically opts for the old tax regime, their incomes will be taxed according to the new tax regime’s slabs and rates.
2. The rebate under Section 87A has been increased to a taxable income of Rs 7 lakh (providing a tax rebate of Rs 25,000), up from Rs 5 lakh (offering a tax rebate of Rs 12,500). Essentially, this means that individuals opting for the new tax regime with taxable incomes of up to Rs 7 lakh will not pay any taxes. Previously, this rebate was available up to a taxable income of Rs 5 lakh.
3. The basic exemption limit has been raised to Rs 3 lakh from the previous Rs 2.5 lakh in the new tax regime.
4. The number of income tax slabs under the new tax regime has been reduced to five, down from six in the previous regime.
5. A standard deduction of Rs 50,000 has been introduced for salaried individuals and pensioners under the new tax regime.
6. Family pensioners can now claim a standard deduction of Rs 15,000 under the new tax regime.
7. The highest surcharge rate has been reduced from 37% to 25% under the new tax regime.
Here are some examples of how these rates would apply:
1. Individuals: Suppose an individual has an annual income of INR 7 lakh in the financial year 2023-24 (assessment year 2024-25). The tax liability would be calculated as follows:
Therefore the total tax liability would be INR 22,500. On which Rebate U/s 87A will be available and hence no tax is required to be paid.
2. HUFs and AOPs: Suppose a Hindu Undivided Family (HUF) has an annual income of INR 8 lakh in the financial year 2023-24 (assessment year 2024-25). The tax liability would be calculated as follows:
Therefore the total tax liability would be INR 72,500. As Income is above 8 lacs rebate U/s 87A is not available.
3. Companies: Suppose a domestic company has a turnover of INR 300 crore in the financial year ending March 31st,2023, and a net profit of INR 50 crore during that period. The tax liability would be calculated as follows:
Therefore the total tax liability would be INR 12.5 crore.