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Income Tax Rates for FY 2023-24 (AY 2024-25) proposed in Budget 2023

Introduction

This article summarizes Income Tax Rates, Surcharge, Health & Education Cess, Special rates, and rebate/relief applicable to various categories of Persons viz. Individuals (Resident & Non Resident), HUF, Firms/LLP, Companies, Co-operative Society, Local Authority, AOP, BOI, artificial juridical persons for income liable to tax in the Financial Year 2023-24 (Assessment Year 2024-25) as proposed in Finance Bill, 2023 vide Budget announced on 01.02.2023. The following amendments related to tax rates/computation have been introduction in Budget 2023:-

a) Change in tax slab of ‘New Tax Regime’

b) Increase in the rebate limit to Rs.7 lakh in the ‘New Tax Regime’

c)Extend the benefit of standard deduction to the ‘New Tax Regime’

d) Reduce the Highest surcharge rate from 37% to 25% in ‘New Tax Regime’

e) Making ‘New Tax Regime’ as default tax regime option

f) Extending applicability of ‘New Tax Regime’ to AOP (other than co-operative), BOI and AJP

g) Lower tax rate of 15% for new Co-operatives that commence manufacturing activities till 31.3.2024

Index

Sr.No. Particulars
1 Individuals : Resident & Non Residents
1.1 Other than Senior Citizen & Super Senior Citizen
1.2 Senior Citizen
1.3 Super Senior Citizen
2 HUF, AOP, BOI, Other Artificial Juridical Person (AJP)
3 New Tax Regime for Individual, HUF, AOP, BOI, AJP u/s. 115BAC
4 Company
4.1 Domestic Company
4.2 Foreign Company
5 Firm & LLP
6 Local Authority
7 Co-operative Society
7.1 Normal Rates
7.2 Special Rates u/s. 115BAD
7.3 AMT
8 Additional Tax for filing Updated Return u/s.139(8A)

1. Tax Rates applicable to Individuals (Resident / Non Resident) for FY 2023-24 (AY 2024-25)

Following Tax Rates are applicable for assessee opting for ‘Old Tax Regime’

a. Income Tax

Net Income Range Rate of Income Tax
1.1 Individuals (Other than senior and super senior citizen)
Up to Rs. 2,50,000
Rs. 2,50,000 to Rs. 5,00,000 5%
Rs. 5,00,000 to Rs. 10,00,000 20%
Above Rs. 10,00,000 30%
1.2 Individuals (Senior Citizen)
Up to Rs. 3,00,000
Rs. 3,00,000 to Rs. 5,00,000 5%
Rs. 5,00,000 to Rs. 10,00,000 20%
Above Rs. 10,00,000 30%
1.3 Individuals (Super Senior Citizen)
Up to Rs. 5,00,000
Rs. 5,00,000 to Rs. 10,00,000 20%
Above Rs. 10,00,000 30%

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

Range of Income Rs. 50 Lakhs to Rs. 1 Crore Rs. 1 Crore to Rs. 2 Crores Rs. 2 Crores to Rs. 5 Crores Exceeding Rs. 5 crores
Surcharge Rate 10% 15% 25% 37%

Note 1: The enhanced surcharge of 25% & 37%, as the case may be, is not levied, from income chargeable to tax under sections 111A, 112, 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: Marginal relief is available from surcharge in following manner-

Net Income Range Marginal Relief
Exceeds Do not Exceed
50 Lakh 1 Crore Amount payable as income tax and surcharge shall not exceed the total amount payable as income tax on total income of Rs 50 Lakh by more than the amount of income that exceeds Rs 50 Lakhs
1 Crore 2 Crore Amount payable as income tax and surcharge shall not exceed the total amount payable as income-tax on total income of Rs. 1 crore by more than the amount of income that exceeds Rs. 1 crore
2 Crore 5 Crore Amount payable as income tax and surcharge shall not exceed the total amount payable as income-tax on total income of Rs. 2 crore by more than the amount of income that exceeds Rs. 2 crore
5 Crore Amount payable as income tax and surcharge shall not exceed the total amount payable as income-tax on total income of Rs. 5 crore by more than the amount of income that exceeds Rs. 5 crore

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 Rate applicable to HUF, AOP, BOI, Other Artificial Juridical Person – Old Tax Regime for FY 2023-24 (AY 2024-25)

Net Income Range Rate of Income Tax
Up to Rs. 2,50,000
Rs. 2,50,000 to Rs. 5,00,000 5%
Rs. 5,00,000 to Rs. 10,00,000 20%
Above Rs. 10,00,000 30%

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

Note 2: 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).

Income Tax Rates

3. New Tax Regime for Individual, HUF, AOP,BOI, AJP u/s. 115BAC for FY 2023-24 (AY 2024-25)

These are Special Rates for Individual, HUF, AOP, BOI, AJP u/s. 115BAC i.e. New Tax Regime. 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. This option has been extended to AOP, BOI & AJPs w.e.f AY 2024-2025.

Total Income (Rs) Rate
Up to 3,00,000 Nil
From 3,00,001 to 6,00,000 5%
From 6,00,001 to 9,00,000 10%
From 9,00,001 to 12,00,000 15%
From 12,00,001 to 15,00,000 20%
Above 15,00,000 30%

Following chart explains difference between New Tax Regime from AY 2024-25 V/s. New Tax Regime for AY 2021-22 to AY 2023-24.

Particulars New Tax Regime for AY 2021-22 to AY 2023-24 New Tax Regime for AY 2024-25 and onwards
No. of Slabs Rates Six Five
Basic Tax Exemption Upto 2,50,000 Upto 3,00,000
Applicability Individuals, HUF Individuals, HUF, AOP – other than co-operative society, BOI, AJP
Default Regime Old Regime New Regime
Standard Deduction of 50,000 Not available Available
Deduction upto 15,000 u/s.57 (iia) for Family Pension Not available Available
Rebate u/s.87A Upto 5,00,000 Upto 7,00,000
Maximum Rebate u/s.87A 12,500 25,000
Highest Surcharge Rate 37 percent 25 percent

 Note 1: Surcharge and Health & Education Cess:

Same as Rates applicable to Individuals given above. Except for the fact, Budget 2023 proposes to reduce the highest surcharge rate from 37 per cent to 25 per cent in the new tax regime.

Surcharge on income-tax under both old regime and new regime is 10 per cent if income is above 50 lakh and up to 1 crore, 15 per cent if income is above 1 crore and up to 2 crore, 25 per cent if income is above 2 crore and up to 5 crore, and 37 per cent if income is above 5 crore. It is proposed that the for those individuals, HUF, AOP (other than co-operative), BOI and AJP under the new regime, surcharge would be same except that the surcharge rate of 37 per cent will not apply. Highest surcharge shall be 25 per cent for income above 2 crore. This would reduce the maximum rate from about 42.7 per cent to about 39 per cent. No change in surcharge is proposed for those who opt to be under the old regime.

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. Budget 2023 proposes to extend the benefit of standard deduction to the new tax regime for the salaried class and the pensioners including family pensioners. Standard deduction of 50,000 to salaried individual, and deduction from family pension up to 15,000, is currently allowed only under the old regime. It is proposed to allow these two deductions under the new regime also.

Note 3: Currently, those with income up to 5 lakh do not pay any income tax in both old and new tax regimes. Budget 2023 proposes to increase the rebate limit to 7 lakh in the new tax regime. Thus, persons in the new tax regime, with income up to 7 lakh will not have to pay any tax.

Note 4: Finance Bill 2023 also proposes the new income tax regime as the default tax regime. However, citizens will continue to have the option to avail the benefit of the old tax regime. This regime would also become the default regime for AOP (other than co-operative), BOI and AJP.

Any individual, HUF, AOP (other than co-operative), BOI or AJP not willing to be taxed under this new regime can opt to be taxed under the old regime. For those person having income under the head “profit and gains of business or profession” and having opted for old regime can revoke that option only once and after that they will continue to be taxed under the new regime. For those not having income under the head “profit and gains of business or profession”, option for old regime may be exercised in each year.

4. Income Tax Rates applicable to Company for FY 2023-24 (AY 2024-25)

4.1 Domestic Company

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

Turnover Criteria Tax Rate
♦ Where its total turnover or gross receipt during the previous year 2021-22 does not exceed Rs. 400 crore 25%
♦ Any other domestic company 30%

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

Range of Income Rs. 1 Crore to Rs.10 Crore Above Rs. 10 Crore
Surcharge Rate 7% 12%

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:

Domestic Company Tax Rate
♦ Where it opted for section 115BA 25%
♦ Where it opted for Section 115BAA 22%
♦ Where it opted for Section 115BAB 15%

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.

4.2 Foreign Company

Nature of Income Tax Rate
Royalty received from Government or an Indian concern in pursuance of an agreement made with the Indian concern after March 31, 1961, but before April 1, 1976, or fees for rendering technical services in pursuance of an agreement made after February 29, 1964 but before April 1, 1976 and where such agreement has, in either case, been approved by the Central Government 50%
Any other income 40%

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

Range of Income Rs. 1 Crore to Rs.10 Crore Above Rs. 10 Crore
Surcharge Rate 2% 5%

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 Rate to Partnership Firm & LLP for FY 2023-24 (AY 2024-25)

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 Rate to Local Authority for FY 2023-24 (AY 2024-25)

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 Rate to Co-operative Society for FY 2023-24 (AY 2024-25)

7.1 Normal Rates

Taxable income Tax Rate
Up to Rs. 10,000 10%
Rs. 10,000 to Rs. 20,000 20%
Above Rs. 20,000 30%

 Surcharge:  It 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.

Range of Income Rs. 1 Crore to Rs.10 Crore Above Rs. 10 Crore
Surcharge Rate 7% 12%

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

Taxable income Tax Rate
Any income 22%

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 15%.

7.4 Concessional tax 15% to promote new manufacturing cooperative society

Budget 2023 Amendment, In order to promote the growth of manufacturing in co-operative sector, a new co-operative society formed on or after 01.04.2023, which commences manufacturing or production by 31.03.2024 and do not avail of any specified incentive or deduction, is proposed to be allowed an option to pay tax at a concessional rate of 15 per cent similar to what is available to new manufacturing companies.

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

In Previous Budget of Year 2022, a new section 140B had 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

Period of Furnishing Updated ITR u/s. 139(8A) Additional Tax Payable
If such return is furnished after expiry of the time available under sub-section (4) or sub-section (5) of section 139 and before completion of period of 12 months from the end of the relevant assessment yea Equal to 25 per cent of aggregate of tax and interest payable
if such return is furnished after the expiry of 12 months from the end of the relevant assessment year but before completion of the period of 24 months from the end of the relevant assessment year Equal to 50 per cent of aggregate of tax and interest payable

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Income Tax Rates compiled by: CA. Sagar Gambhir | FCA, DISA (ICAI), DIRM (ICAI), B.COM | casagargambhir@gmail.com

Author can be reached at casagargambhir@gmail.com 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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