For the Assessment Year (AY) 2023–2024, the Income Tax Department has released new income tax slabs for salaried persons. Since April 1, 2023, a new tax system has been in place. The income earned in FY 2023–24 will be subject to the new income tax rates and slabs. In this blog, we'll talk about the new income tax slabs for salaried persons and employees for AY 2023–2024 and the rate used for ITR filing.
New Income Tax Slabs for Salaried People/Employees: 2023-24
The following are the new income tax slabs for salaried persons and employees for AY 2023–24:
New Tax Regime
Up to Rs. 3,00,000: No tax
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: 25%
Old Tax Regime
Up to Rs. 2,50,000: No tax
Rs. 2,50,001 to Rs. 5,00,000: 5%
Rs. 5,00,001 to Rs. 7,50,000: 10%
Rs. 7,50,001 to Rs. 10,00,000: 15%
Rs. 10,00,001 to Rs. 12,50,000: 20%
Rs. 12,50,001 to Rs. 15,00,000: 25%
• Above Rs. 15,00,000: 30
The appropriate tax slab and rates for salaried individuals for ITR filing online in 2023 (i.e., for AY 2023–24 or FY 2022-23) will be the same as in the prior year. The new amendments that Finance Minister Nirmala Sitharaman suggested in Budget 2023 will take effect the next year or for AY 2024–2025. For income tax returns online filing in AY 2023–2024, the previous tax system will therefore be in effect.
How to Compute the Income Tax Due Under the New Income Tax Slabs?
Here is how to determine the amount of income tax due if you have chosen the new income tax slabs for the current financial year or FY 2022–23.
Be aware that under the current tax system, a person can only deduct expenses under section 80CCD (2) of the Income-tax Act 1961. Under the new tax law, no other exemptions or deductions are allowed.
Here is an illustration of how income tax might be calculated under the new income tax slabs.
Assume that a person's gross annual income in FY 2022–2023 is Rs 20 lakh. Additionally, Rs. 1.5 lakh has been placed into his or her Tier-I NPS account by the company. As a result, he can now claim a deduction under section 80CCD(2) of the Income-tax Act.
Therefore, after subtracting Rs 1.5 lakh from Rs 20 lakh, the net taxable income that would be used to determine the amount of income tax due is Rs 18.50 lakh.
Up to Rs 2,50,000 of income is free from taxation under the new income tax slabs. Therefore, there won't be any tax due on this revenue. After this, a balance of Rs 16,00,000 in income is still subject to tax (Rs 18,50,000 minus Rs 2,50,000).
The following slab is from Rs 2.5 lakh to Rs 5 lakh. It means that 5% of Rs 16,00,000 will be taxed, or Rs 2.5 lakh (Rs 5 lakh minus Rs 2.5 lakh). Here, Rs 12,500 in tax will be due.
After this, a balance of Rs 13,50,000 in income is still subject to tax (Rs 16,00,000 minus Rs 2,50,000). The following bracket ranges from Rs. 5 lakh to Rs. 7.5 lakh. The next Rs 2.5 lakh (Rs 7.5 lakh minus Rs 5 lakh) from Rs 13,50,000 will be subject to 10% tax. The amount of income tax due is calculated to be Rs 25,000.
(Rs 13,50,000 minus Rs 2,50,000) The remaining revenue is Rs 11,00,000. The following income tax bracket ranges from Rs 7.5 lakh to Rs 10 lakh. As a result, a 15% tax will be applied to the Rs 2.5 lakh (Rs 10 lakh less Rs 7.5 lakh) of Rs 11,00,000. The tax obligation will be Rs. 37,500.
The remaining income that is still subject to tax is worth Rs. 8,50,000 (or Rs. 11,00,000 less Rs. 2.5 lahks). The following bracket ranges from Rs. 10 lahks to Rs. 12,50,000. The following Rs 2,50,000 out of Rs 8,50,000 will be subject to Rs 20% tax. The amount of tax due is Rs. 50,000.
(Rs 8,50,000 minus Rs 2,50,000) The remaining income that is still subject to tax is Rs 6,00,000. Between Rs. 12,50,000 and Rs. 15,00,000 is the following slab. The subsequent Rs 2,50,000 (Rs 15,00,000 minus Rs 12,50,000) from Rs 6,00,000 will be subject to a 25% tax. The tax obligation will be Rs. 62,500.
The remaining revenue is Rs 3,50,000 (Rs 6,00,000 minus Rs 2,50,000). It will be subject to taxation at the 30% rate for the last tax bracket or above Rs 15,00,000. The amount of tax due is Rs 1,05,000.
The total amount of tax due is Rs 2,92,500. The amount of the cess and surcharge must still be added.
Cess is assessed at a rate of 4% on the owed income tax. You must pay the charge if your income is more than Rs 50 lakh.
The total tax is Rs 3,04,200 after a cess of Rs 11,700.
What exemptions and deductions are available under the old tax regime but not under the new income tax regime?
Taxpayers could use a number of exemptions and deductions under the previous tax regime to lower their taxable income. However, under the new tax regime, taxpayers who desire to pay concessional taxes must forfeit tax breaks and exemptions available under the old tax regime. The following are some exemptions and deductions that were available under the old tax regime but are not available under the new tax regime:
- Investments in the Public Provident Fund (PPF), the Equity-Linked Savings Scheme (ELSS), the National Savings Certificate (NSC), and other investments are tax deductible under Section 80C.
- Health insurance premiums paid for the self, spouse, and dependent children are deductible under Section 80D.
- Interest paid on student loan principal is deductible under Section 80E.
- Donations to certain charity organizations or trusts are deductible under Section 80G.
- Deductions allowed under Section 80TTA/80TTB include interest income from savings accounts up to a maximum of Rs. 10,000 for non-senior citizens and Rs. 50,000 for senior people.
- Deductions under Section 24(b) for interest paid on mortgage loans
- The House Rent Allowance (HRA) and the Leave Travel Allowance (LTA) deductions
- Child education allowance deductions.
However, taxpayers can still use a few deductions under the new tax regime, such as the deductions for interest on rented property under Section 24(b) and NPS contributions under Section 80CCD(2). The new tax regime also offers exemptions for gratuity exemption, leave encashment exemption and voluntary retirement exemption.
The Income Tax Department has released the revised income tax rates and slabs for salaried persons and employees for the AY 2023–24. Since April 1, 2023, a new tax regime has been in place. The older salaried individuals should be informed of the new income tax slabs and rates to appropriately arrange their finances for ITR filing Online in AY 2023–2024.