Introduction:
Individuals/HUF/AOP/BOI/AJP are taxed on the basis of income slabs in India. India follows progressive tax method and accordingly there is a direct relation between income and tax rates. As income increases, tax increases and vice-versa. In short, a person who earns more have to pay tax more.
Income Slabs:
Income Slabs can be defined as a range, where tax rates varies according to range. For example, if a income of a person is between Rs. 0/- to Rs. 3,00,000/-, he won’t have to pay any tax and if income of a person is between Rs. 3,00,000/- to Rs. 6,00,000/-, he will have to pay tax @ 5% and so on.
Revised Income tax slabs for AY 2024-25 as per Section 115BAC:
| Upto Rs. 3,00,000 | Nil |
| Rs. 3 lacs to Rs. 6 lacs | @5% |
| Rs. 6 lacs to Rs. 9 lacs | @10% |
| Rs. 9 lacs to Rs. 12 lacs | @15% |
| Rs. 12 lacs to Rs. 15 lacs | @20% |
| Above Rs. 15 lacs | @30% |
(Income u/s 111A, 112, 112A etc. shall be taxable @special rates.)
* New Tax rates are default and optional.
Rebate under Section 87A:
If TTI <= Rs. 7 lacs in the PFY, rebate u/s 87A Rs. 25,000 or tax liability whichever is less before summing up cess and surcharge.
Cess:
Health & Education Cess @ 4% is to be added on tax and surcharge.
Surcharge:
Surcharge is applicable to tax liability estimated as per the income tax slab for the assessment year. The rate of applicable surcharge varies based on total taxable income:
| Rs. 50 lacs <= TTI < 1 Cr.: | Surcharge is @ 10% |
| Rs. 1 Cr <= TTI < 2 Cr.: | Surcharge is @ 15% |
| Rs. TTI >= 2 Cr.: | Surcharge is @ 25% |
The maximum surcharge rate is limited to 15% in case of capital gain incomes under sections 111A, 112 and 112A.
Special Points:
1. Assessee paid tax as per section 115BAC is not required to pay AMT.
2. Assessee can claim only following deductions:
a. Transport allowances in case of a specially-abled person.
b. Conveyance allowance received as part of the employment.
c. Any compensation received to meet the cost of travel on tour or transfer.
d. Daily allowance received.
e. Perquisites for official purposes.
f. Exemption on voluntary retirement 10(10C), gratuity u/s 10(10) and Leave encashment u/s 10(10AA).
g. Interest on Home Loan on let-out property (Section 24).
h. Gifts up to Rs. 50,000.
i. Deduction for employer’s contribution to NPS account [Section 80CCD(2)].
j. Deduction for additional employee cost (Section 80JJA).
k. standard deduction of Rs. 50,000 under New Tax Regime applicable from PFY 2023-24.
l. deduction under Section 57(iia) of family pension income.
m. deduction of amount paid or deposited in the Agniveer Corpus Fund under Section 80CCH(2).
Glossary:
1. TTI = Total Taxable Income
2. PFY = Previous Financial Year
3. AY = Assessment Year
4. AMT= Alternate Minimum Tax
Conclusion: Understanding the intricacies of income tax slabs, rebates, cess, surcharge, and deductions is crucial for effective tax planning. As the AY 2024-25 brings new default and optional tax rates, individuals/HUF/AOP/BOI/AJP should stay informed for optimal financial management.
Author Bio
Interesting