Income Tax Slabs FY 2023-24

For several years, many people purchased life insurance simply as a tax-saving method. The truth is, life insurance plays a crucial role in every sound financial plan. Before we create financial plans for the upcoming financial year, let’s better understand the new rules and regulations. In February 2023, the finance minister outlined the budget for the upcoming year, which included a few changes to the new tax regime. The finance minister reduced the number of tax slabs and extended the standard deduction to the salaried class and pensioners as well.

Let’s better understand the Income Tax slabs under Union Budget 2023.

1. New Income Tax Slabs as per Union Budget 2023:

2. NOTES:
   • The tax rates in the new tax regime remain the same across all categories, i.e. the Hindu Undivided Family and individuals up to 60 years of age, senior citizens above 60 years to 80 years of age, and super senior citizens above 80 years. Therefore, no increase of the basic exemption limit will benefit the senior and the super senior citizens in the new tax regime.
   • Individuals with a net taxable income of up to ₹ 7 lakh will be eligible for tax rebate u/s 87A under the new tax regime. The rebate limit remains at ₹ 5 lakh for individuals who choose to pay tax under the old regime.
3. Income tax slab rate for Old Tax Regime FY 2023-24:

The old tax regime differentiates between three age cohorts of tax-paying individuals.

Income Tax Slabs for Individuals below 60 years and HUF:

NOTES:

• The exemption limit of income tax is up to ₹ 2.5 lakh for all individuals, HUF and individuals below 60 years and NRIs for FY 2023-24.
  • An additional 4% health and education cess is applicable on the tax amount.

Income Tax Slabs for Individuals aged between 60 years and 80 years :

NOTES:

• The exemption limit on income tax is up to ₹3 lakh for senior citizens for FY 2023-24.
  • An additional 4% health and education cess is applicable on the tax amount.

Income Tax Slabs for Individuals above 80 years:

NOTES:

• The exemption limit on income tax is up to ₹5 lakh for super senior citizens for FY 2023-24.
  • An additional 4% health and education cess is applicable on the tax amount.
• Surcharge for F.Y.2023-24:

Surcharge applicable as per tax rates are listed below across all categories mentioned above:

• 10% of Income Tax for income > ₹50 lakh
  • 15% of Income Tax for income > ₹1 crore
  • 25% of Income Tax for income > ₹2 crore
  • 37%^* of Income Tax for income > ₹5 crore

The enhanced surcharge of 25% & 37%, as the case may be, is not levied, from income chargeable to tax under sections 111A, 112A and 115AD. Hence, the maximum rate of surcharge on tax payable on such incomes shall be 15%.

The maximum rate of surcharge on tax payable on dividend income or capital gain referred to in Section 112, shall be 15%. The surcharge rate for an Association of Persons (AOP) with all members as a company, shall be capped at 15%.

It is to be noted that relevant marginal relief from surcharge is available.

2023 Union Budget Personal Income Tax Highlights

• The standard deduction benefit of ₹ 50,000 is now extended to the salaried class and pensioners under the new regime.
  • The new regime has become the default tax system. However, taxpayers can choose to continue to calculate and pay taxes as per the old regime.
  • The highest surcharge levied on personal income tax has been reduced significantly from 37% to 25%.
  • The leave encashment limit on retirement for non-governmental salaried employees has increased from ₹ 3 lakh to ₹ 25 lakh.
  • Deduction from capital gains on investment in a residential house is now capped at ₹ 10 crore.
  • Income from insurance policies (other than ULIP) having premium or aggregate of premium above ₹ 5, 00,000 in a year will be taxed. This income shall be taxable under the head “income from other sources”. Deduction shall be allowed for premium paid if such deduction is not claimed earlier under any other provisions of the Act. The new rule shall apply for policies issued on or after 1st April, 2023. However, the income is proposed to be exempt if received on the death of the insured person.

Frequently Asked Questions (FAQ)

• Is filing income tax returns compulsory?

As per income tax laws, filing income tax returns is mandatory for individuals whose total income during the financial year exceeds the basic exemption limit of more than the gross total income of ₹ 2,50,000 under the old regime or ₹ 3,00,000 under the new regime. You will be attracting penalties by not filing returns. Also, it will hamper your chances of getting a loan, when you apply for a visa for travel purposes, or even property registration.

Do note that the exemption limit for an individual depends on his/her age. Citizens will have to inform the government mandatorily about income earned irrespective of the tax regime in Financial Year 2023-24.

• Are there separate slab rates for different categories?

Individual taxpayers have to pay tax based on their age and income. For the financial year 2023-24, income tax slab rates are divided into the old regime, which has higher tax rates with three tax slabs and different deductions for senior and super senior citizens, and the revised new regime with lower tax rates.

• Is there any standard deduction for FY 2023-24?

A standard deduction is a flat deduction of ₹ 50,000 to individuals earning a salary or pension income under the head “Salaries”, irrespective of expenses or investments by the individuals. From FY 2023-2024, this deduction can be claimed under both regimes.

• What is the 80C limit for 2023-24?

Section 80C is a popular section among taxpayers as it allows to reduce taxable income up to a maximum deduction of ₹ 1.5 lakh by making tax-saving investments like life insurance premium or incurring eligible expenses like school tuition fees which are available only for Individuals and HUFs. However, deduction is not allowed if the taxpayer opts for the new tax regime.

• What are the Income tax slab rates under existing new regime and proposed new regime for FY 2023-24?

The Union Budget 2023 reduces the number of tax slabs under the new regime. We can compare the current new regime with the proposed new regime as follows:

• How can individuals opt for the new tax regime? Understanding the exemption

inclusions and exclusions

Taxpayers choosing to file tax under the new tax regime will have to forgo a few exemptions and deductions that were available in the existing old tax regime. Although there are 70 deductions and exemptions that taxpayers need to forgo, below are the most common ones:

What’s not allowed under new tax rate regime?

• Leave Travel Allowance (LTA) for salaried employees
• House Rent Allowance (HRA)
• Children education allowance
• Helper allowance
• Interest on housing loan (Section 24)
• Other special allowances [Section 10(14)]
• Professional tax
• Donation to Political party/trust, etc

What’s retained under new tax rate regime?

• Retirement benefits, gratuity etc.
• Conveyance allowance for expenditure incurred for travelling for duties of an office
• Transport allowance for specially-abled people
• Education scholarships
• Retrenchment compensation
• Investment in Notified Pension Scheme under section 80CCD(2)
• Depreciation u/s 32 of the Income-tax act except additional depreciation.
• Which entities are required to file income tax returns mandatorily?

As per the Income Tax Act, it is mandatory to file ITRs for these entities in India:

1. Individuals who want to claim an income tax refund
   1. Those who want to set off and carry forward losses under a head of income
   1. Individuals with assets or financial interests located outside of India
   1. Individuals gaining income from property held under a trust for religious, charitable, or political purposes.
   1. NRIs whose income accrued in India exceed ₹ 2.5 lakh

• Is there any standard deduction for FY 2023-24?

Yes, the Income Tax Act allows a standard deduction of ₹ 50,000 to the income taxable under the head ‘Salaries’ for FY 2023-24.

Standard deduction is a tax benefit that can be claimed irrespective of the actual amount spent on Transport Allowance and Medical Allowance and is applicable to individuals earning a salary or pension income. The limit of standard deduction was set at ₹ 50,000.

• What is the 80C limit for 2023-24?

The exemption under section 80C of the Income Tax Act can be availed of up to ₹1.5 lakh. Section 80C of the Income Tax Act, 1961, helps you save taxes on various investments and expenses you make during the financial year. Fixed Deposits in Bank, Public Provident Fund deposits (PPF), investment in National Pension Scheme (NPS), Employees Provident Fund (EPF) and Equity Linked Savings Schemes (ELSS) are some of the avenues open for you to avail of deductions under section 80C.

However, if you opt for the new tax regime announced in the Union Budget in 2020, Section 80C deductions claimed for provident fund contributions, life insurance premium, school tuition fee for children and various specified investments such as ELSS, NPS, PPF cannot be claimed.