Income Tax Slab for FY 2022–23

With income comes tax. Whether you are salaried or self-employed, when your income exceeds a certain threshold, you must pay Income Tax. The threshold or limits are known as ‘tax slabs and are revised by the Government of India every year. The taxes collected help with the funding of government welfare schemes and other public services.

The tax slabs are useful for calculating income tax as per your earnings.

Income tax slabs and tax rates

The Union Budget 2020–21 announced that taxpayers would have two tax regimes to choose from: old and new.

Let us see the tax rates for individuals below 60 years, HUFs, and NRIs for FY 22–23 (AY 23–34) under both tax regimes:

 There are different income tax slab rates for senior citizens above 60 years and below 80 years under the Old Tax Regime. Income tax rates under the new regime are the same for senior citizens.

What’s common in the old and new tax regimes?

Some income tax rules apply to both new and old tax regimes. These are as follows:

1. Tax exemptions under certain Income Tax Act sections
2. a. Section 87-A: If your total income is up to Rs 5 lac, you are eligible for 100% tax exemption or Rs 12,500, whichever is lower.
3. b. Section 80 CCD (2): It considers the contribution from your employer to your pension scheme.
4. c. Section 10 (10D): It includes the maturity payments of your life insurance plans.
5. Surcharge and Cess

These are also applicable to both regimes. Health and Education Cess is charged at 4% of the total income tax. Surcharge starts at 10% for incomes above Rs 50 lac.

Which is better, the old or the new tax regime?

Before you jump to the tax calculations according to the tax slabs, you should know that most tax deductions apply only to the old tax regime. Only a few deductions are included in the new tax regime.

The following are the major tax deductions available exclusively in the old regime:

1. Standard Deduction: Rs 50,000 is exempted from the total income under Section 16
2. Section 80 C and sub-sections:

• It includes PPF, life insurance premiums, ELSS mutual funds, housing loan principal, etc.
• Section 80 CCC is applicable when you purchase an annuity plan under a pension scheme.
• Section 80 CCD (1) considers the pension schemes of the central government.
• The total exemption allowed in all of the above is Rs 1,50,000.

3. Section 80(D): A maximum of Rs 25,000 is exempted towards health insurance premiums and preventive health check-ups.
4. HRA and LTA: These exemptions are applicable for salaried individuals.

Let us understand the difference between the two tax regimes with an example.

Case 1

Suppose you are a salaried individual of below 60 years, and your net taxable income is Rs 12,00,000. You have savings u/s 80 C and are also eligible for HRA and LTA exemptions.

The tax calculation for you will be as follows:

 Here, you should choose the old tax regime where the tax is less than the new one.

Case 2

Now, suppose you have a salary of Rs 20 lac. However, you are not eligible for HRA exemption.

 Here, the new tax regime will prove to be more tax efficient than the old regime.

Conclusion

Before choosing the income tax regime, you must calculate the tax considering all deductions applicable to you. No one rule fits all. Income tax guidelines are revised annually and announced at every Budget on 1st February by the Finance Minister. You can stay updated on income tax rules with us.

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