Income Tax Rates for FY 2021-22 (AY 2022-23) & FY 2022-23 (AY 2023-24)

Rates of Income Tax for FY 2021-22 (AY 2022-23) and FY 2022-23 (AY 2023-24) applicable to various categories of persons viz. Individuals, Firms, companies etc.

Introduction

This article summarizes Tax Rates, Surcharge, Health & Education Cess, Special rates, and rebate/relief applicable to various categories of Persons viz. Individuals (Resident & Non Resident), Hindu undivided family , Firms/LLP, Companies, Co-operative Society, Local Authority, AOP, BOI, artificial juridical persons for income liable to tax in the Financial Year 2021-22 (Assessment Year 2022-23) and Financial Year 2022-23 (Assessment Year 2023-24). Since there is no change in Tax Rates in the Finance Bill/Budget 2022, hence Tax Rates applicable to both the assessment year are same, except few changes proposed in Budget 2022 mentioned separately in article.

Following amendments related to tax rates have been proposed in Budget 2022:-

a) To reduce surcharge on long term capital gains,

b) Rationalization of Surcharge on certain AOPs

c) Incentives for newly incorporated manufacturing entities under concessional tax regime,

d) Withdrawal of concessional rate of taxation on dividend income under section 115BBD

e) Reduced Alternate minimum tax rate and Surcharge for Cooperative,

f) Additional Tax for Filing of Updated Return

g) Scheme for taxation of virtual digital assets,

1. Tax Rates applicable to Individuals (Resident / Non Resident) for FY 2021-22 & FY 2022-23

a. Income Tax 

b. Surcharge:Surcharge is levied on the amount of income-tax at following rates if total income of an assessee exceeds specified limits:-

Note 1: The enhanced surcharge of 25% & 37%, as the case may be, is not levied, from income chargeable to tax under sections 115AD(1)(b),111A, 112A and Dividend Income. Hence, the maximum rate of surcharge on tax payable on such incomes shall be 15%, except when the income is taxable under section 115A, 115AB, 115AC, 115ACA and 115E. 

Note 2: As proposed in Budget 2022, Surcharge on income u/s. 112 on transfer of any capital asset shall be maximum 15% (applicable w.e.f AY 2023-24).

The long-term capital gains on listed equity shares, units etc. are liable to maximum surcharge of 15 per cent, while the other long term capital gains are subjected to a graded surcharge which goes up to 37 per cent. Budget 2022 propose to cap the surcharge on long term capital gains arising on transfer of any type of assets at 15 per cent. 

Note 3: As proposed in Budget 2022, In case of an association of persons consisting of only companies as its members, the rate of surcharge on the amount of Income-tax shall be maximum 15% (applicable w.e.f AY 2023-24).

In the globalized business world, there are several works contracts whose terms and conditions mandatorily require formation of a consortium. The members in the consortium are generally companies. In such cases, the income of these AOPs has to suffer a graded surcharge upto 37 per cent, which is a lot more than the surcharge on the individual companies. Accordingly, Budget 2022 propose to cap the Surcharge of these AOP’s at 15 per cent. 

Note 4: Marginal relief is available from surcharge in following manner-

c. Health and Education Cess :Health and Education Cess is levied at the rate of 4% on the amount of income-tax plus surcharge.

 d. Rebate u/s.87A

A resident individual (whose net income does not exceed Rs. 5,00,000) can avail rebate under section 87A. It is deductible from income-tax before calculating education cess. The amount of rebate is 100 per cent of income-tax or Rs. 12,500, whichever is less.

2. Income Tax Rates for HUF, AOP, BOI, Other Artificial Juridical Person for FY 2021-22 & FY 2022-23

 Note 1: Surcharge and Health & Education Cess: Same as Rates applicable to Individuals given above

3. Special Rates for Individual & HUF u/s. 115BAC for FY 2021-22 & FY 2022-23

The Finance Act, 2020, has provided an option to Individuals and HUF for payment of taxes at the following reduced rates from Assessment Year 2021-22 and onwards:

Note 1: Surcharge and Health & Education Cess as well as Rebate u/s.87A: Same as Rates applicable to Individuals given above 

Note 2: The option to pay tax at lower rates shall be available only if the total income of assessee is computed without claiming specified exemptions or deductions

4. Tax Rates applicable to Company for FY 2021-22 & FY 2022-23

4.1 Domestic Company

Normal Income-tax rates applicable in case of domestic companies are as follows:

Surcharge : The amount of income-tax shall be increased by a surcharge at the specified rate percentage of such tax:-

The surcharge shall be subject to marginal relief.

Health and Education Cess : The amount of income-tax and the applicable surcharge, shall be further increased by health and education cess calculated at the rate of 4 percent of such income-tax and surcharge.

Special Tax rates applicable to a domestic company

The special Income-tax rates applicable in case of domestic companies are as follows:

In Budget 2022, it is proposed to amend section 115BAB so as to extend the date of commencement of manufacturing or production of an article or thing, from 31st March, 2023 to 31st March, 2024. This amendment will take effect from 1st April, 2022 and will accordingly apply in relation to the assessment year 2022-23 and subsequent assessment years. 

Surcharge : The rate of surcharge in case of a company opting for taxability under Section 115BAA or Section 115BAB shall be flat 10% irrespective of amount of total income. 

Health and Education Cess: The amount of income-tax and the applicable surcharge, shall be further increased by health and education cess calculated at the rate of 4 percent of such income-tax and surcharge.

MAT : The domestic company who has opted for special taxation regime under Section 115BAA & 115BAB is exempted from provision of MAT. However, no exemption is available in case where section 115BA has been opted.

In that case, the provisions of Minimum Alternate Tax (MAT) applies, tax payable cannot be less than 15% (+HEC) of “Book profit” computed as per section 115JB.

However, MAT is levied at the rate of 9% (plus surcharge and cess as applicable) in case of a company, being a unit of an International Financial Services Centre and deriving its income solely in convertible foreign exchange.

Budget 2022 Update: Withdrawal of concessional rate of taxation on dividend income under section 115BBD

Section 115BBD of the Act provides for a concessional rate of tax of 15 % on the dividend income received by an Indian company from a foreign company in which the said Indian company holds 26 % or more in nominal value of equity shares (specified foreign company). This rate was aligned to the rate of tax provided under section 115-O of the Act.

Finance Act, 2020 abolished the dividend distribution tax provided in section 115-O to, inter-alia, provide that dividend shall be taxed in the hands of the shareholder at applicable rates plus surcharge and cess.

In order to provide parity in the tax treatment in case of dividends received by Indian companies from specified foreign companies vis a vis dividend received from domestic companies, it is proposed to amend section 115BBD of the Act to provide that the provisions of this section shall not apply to any assessment year beginning on or after the 1st day of April, 2023. This amendment will take effect from 1 st April, 2023 and will accordingly apply in relation to the assessment year 2023-24 and subsequent assessment years

4.2 Foreign Company

 Surcharge : The amount of income-tax shall be increased by a surcharge at the specified rate percentage of such tax:-

However, the surcharge shall be subject to marginal relief.

Health and Education Cess : The amount of income-tax and the applicable surcharge, shall be further increased by health and education cess calculated at the rate of 4 percent of such income-tax and surcharge.

5. Income Tax Rates of Partnership Firm & LLP for FY 2021-22 & FY 2022-23

Partnership firm (including LLP) is taxable at 30%.

Surcharge : The amount of income-tax shall be increased by a surcharge at the rate of 12% of such tax, where total income exceeds one crore rupees. However, the surcharge shall be subject to marginal relief (where income exceeds one crore rupees, the total amount payable as income-tax and surcharge shall not exceed total amount payable as income-tax on total income of one crore rupees by more than the amount of income that exceeds one crore rupees).

Health and Education Cess: The amount of income-tax and the applicable surcharge, shall be further increased by health and education cess calculated at the rate of 4 percent of such income-tax and surcharge

6. Income Tax Rates of Local Authority for FY 2021-22 & FY 2022-23

Local authority is taxable at 30%. 

Surcharge : The amount of income-tax shall be increased by a surcharge at the rate of 12% of such tax, where total income exceeds one crore rupees. However, the surcharge shall be subject to marginal relief (where income exceeds one crore rupees, the total amount payable as income-tax and surcharge shall not exceed total amount payable as income-tax on total income of one crore rupees by more than the amount of income that exceeds one crore rupees). 

Health and Education Cess : The amount of income-tax and the applicable surcharge, shall be further increased by health and education cess calculated at the rate of 4 percent of such income-tax and surcharge.

7. Income Tax Rates of Co-operative Society for FY 2021-22 & FY 2022-23

7.1 Normal Rates

 Surcharge: The amount of income-tax shall be increased by a surcharge at the rate of 12% of such tax, where total income exceeds one crore rupees. However, the surcharge shall be subject to marginal relief (where income exceeds one crore rupees, the total amount payable as income-tax and surcharge shall not exceed total amount payable as income-tax on total income of one crore rupees by more than the amount of income that exceeds one crore rupees).

As proposed in Budget 2022, Surcharge shall be charged at the following rates w.e.f. AY 2023-24, to reduce the surcharge on co-operative societies from present 12 per cent to 7 per cent for those having total income of more than 1 crore and up to 10 crores.

Marginal relief is provided in cases of surcharge.

 Health and Education Cess: The amount of income-tax and the applicable surcharge, shall be further increased by health and education cess calculated at the rate of four percent of such income-tax and surcharge.

7.2 Special tax rates applicable to a Co-operative societies

Note:

1. The Finance Act, 2020 has inserted a new Section 115BADin Income-tax Act to provide an option to the co-operative societies to get taxed at the rate of 22% plus10% surcharge and 4% cess.

2. The resident co-operative societies have an option to opt for taxation under newly Section 115BADof the Act w.e.f. Assessment Year 2021-22. The option once exercised under this section cannot be subsequently withdrawn for the same or any other previous year.

3. If the new regime of Section 115BADis opted by a co-operative society, its income shall be computed without providing for specified exemption, deduction or incentive available under the Act. The option to pay tax at lower rates shall be available only if the total income of co-operative society is computed without claiming specified exemptions or deductions

4. The societies opting for this section have been kept out of the purview of Alternate Minimum Tax (AMT).

5. Further, the provision relating to computation, carry forward and set-off of AMT credit shall not apply to these assessee’s.

7.3. Alternate Minimum Tax (AMT) on Co-operative Society

Section 115JC of the Act, inter alia, provides for the alternate minimum tax (AMT) payable by co-operative societies, which is at the rate of 18.5%. However, vide the Taxation Laws (Amendment) Act, 2019, the Minimum Alternate Tax (MAT) rate for companies has been reduced to 15%.

Therefore, in order to provide parity between co-operative societies and companies, In Budget 2022, it is proposed to modify sub-section (4) of section 115JC to reduce the AMT rate at which co-operative societies are liable to pay income-tax to 15%. Consequential amendment is also proposed in clause (b) of section 115JF in relation to the definition of “alternate minimum tax”

This amendment will take effect from 1st April, 2023 and will accordingly apply in relation to the assessment year 2023-24 and subsequent assessment years

8. Additional Tax u/s. 140B (for opting to file Updated ITR u/s. 139(8A)

In Budget 2022, a new section 140B has been proposed to provide for the tax required to be paid for opting to file a return under the proposed provisions i.e. sub-section (8A) of section 139 of the Act

This amendment will take effect from 1st April, 2022.

9. Taxation of Virtual Digital Assets u/s. 115BBH

New scheme to provide for taxation of virtual digital assets has been proposed in the Budget 2022. The proposed section 115BBH seeks to provide that where the total income of an assessee includes any income from transfer of any virtual digital asset, the income tax payable shall be the aggregate of the amount of income-tax calculated on income of transfer of any virtual digital asset at the rate of 30% and the amount of income-tax with which the assessee would have been chargeable had the total income of the assessee been reduced by the aggregate of the income from transfer of virtual digital asset.

However, no deduction in respect of any expenditure (other than cost of acquisition) or allowance or set off of any loss shall be allowed to the assessee under any provision of the Act while computing income from transfer of such asset.

Further, no set off of any loss arising from transfer of virtual digital asset shall be allowed against any income computed under any other provision of the Act and such loss shall not be allowed to be carried forward to subsequent assessment years.

This amendment will take effect from 1st April, 2023 and will accordingly apply in relation to the assessment year 2023-24 and subsequent assessment years.

To define the term “virtual digital asset”, a new clause (47A) is proposed to be inserted to section 2 of the Act. As per the proposed new clause, a virtual digital asset is proposed to mean any information or code or number or token (not being Indian currency or any foreign currency), generated through cryptographic means or otherwise, by whatever name called, providing a digital representation of value which is exchanged with or without consideration, with the promise or representation of having inherent value, or functions as a store of value or a unit of account and includes its use in any financial transaction or investment, but not limited to, investment schemes and can be transferred, stored or traded electronically. Non fungible token and; any other token of similar nature are included in the definition.

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Income Tax Rates compiled by: CA. Sagar Gambhir | FCA, DISA (ICAI), DIRM (ICAI), B.COM | [email protected]

Author can be reached at [email protected] for any queries, issues & recommendations relating to article. Any feedback for improvement would be really appreciated.

Disclaimer: The contents of this article are for information purposes only and does not constitute an advice or a legal opinion and are personal views of the author. It is based upon relevant law and/or facts available at that point of time and prepared with due accuracy & reliability. Readers are requested to check and refer relevant provisions of statute, latest judicial pronouncements, circulars, clarifications etc before acting on the basis of the above write up.  The possibility of other views on the subject matter cannot be ruled out. By the use of the said information, you agree that Author / TaxGuru is not responsible or liable in any manner for the authenticity, accuracy, completeness, errors or any kind of omissions in this piece of information for any action taken thereof. This is not any kind of advertisement or solicitation of work by a professional.

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