This article would help you to understand about Income Tax Slab Rate Under New Tax System & Old Tax Regime. You can plan whether you should opt to new tax rate or old tax regime, according to your taxable income and available income tax deductions under the Income Tax Act,1961.
Every year, our honourable finance minister of India releases the Union Budget in the Parliament, which includes the income tax rates for the upcoming financial year. The announced income tax rates and slabs are valid for the following financial year. When the budget is announced in February, the finance minister typically makes a statement, and once the Finance Bill is ratified by the legislature, it takes effect in April of that Financial year. For instance, the slab rate announced by the Government in the Union Budget in February 2022 regarding income tax slabs will take effect on April 1, 2022. The government made no adjustments to the income tax slabs and rates for the current financial year 2022-2023. A taxpayer will therefore continue to pay tax at the same rates as the previous financial year. There was just one tax system up until FY 2019–20, which included four tax slab and rates. An individual was additionally permitted to make deductions under chapter VIA of the Income Tax Act, 1961, under sections like 80C, 80D, 80GG, 80G, 80TTA, 80U etc. as well as tax exemptions on house rent allowance (HRA), leave travel concession (LTC), Transportation allowance, etc. in order to lower the gross total income. There will be a new, more lenient tax system starting in FY 2020–21.
New Tax Regime Introduced
In comparison to the previous, current tax regime, the new tax regime has reduced tax rates. A person must sacrifice almost 70 frequently used tax deductions and exemptions if they choose the new tax system. The new tax system contains seven tax rates and slabs. It’s crucial to remember that the new tax system is optional. Every financial year, a person or Hindu Undivided Family (HUF) must decide between the old, pre-existing tax regime and the new tax regime. As long as they don’t make any money from their businesses, this applies. An individual taxpayer or HUF is eligible to choose the new income tax regime if they have business income. However, once they have chosen, they only have one chance in a lifetime to go back to the previous tax system. Once they’ve converted back, they won’t be able to choose the new income tax system in subsequent financial years.
How to determine your Income tax bracket/ Income Tax Slab Rate
One needs to be aware of the tax brackets their income falls under in order to determine the income tax due in a specific financial year. Additionally, it will depend on the income tax structure that person chooses for a specific financial year. Before deciding on one, a person will compare the income tax owed under the two tax systems.
Knowing the taxable income on which tax must be computed is necessary before knowing the income tax slabs and rates that apply to your income. If a person continues to pay income taxes under the old, current system, then he or she is qualified to claim tax exemptions (such as the standard deduction, the house rent exemption, and the leave travel allowance exemption). An individual gets to the taxable income on which income tax is calculated after claiming and subtracting the tax exemptions and deductions for which they are qualified.
For instance, your total annual income is Rs. 12 lakh. Sections 80C, 80TTA, and 80CCD permit you to claim deduction of Rs. 2.10 lakh from your Gross Total Income. You must calculate taxes on taxable income of Rs. 9.9 lakh (Rs 12 lakh – Rs 2.10 lakh). In the previous tax system, your income tax bracket would range from Rs 5 lakh to Rs 10 lakh. There is a 20% tax rate.
One cannot, however, claim the above-mentioned tax exemptions and deductions if they choose a new, concessional tax regime. The taxable income from the aforementioned example will be Rs. 12 lakh, from which the amount of tax due will be determined. An individual’s income is taxed at a rate between Rs 10,001 and Rs 12,50,000 under the new system. Here, taxes are likewise 20%.
Income Tax Slab Rates under the Old Tax System for FY 2021–22 (AY 2022–23), FY 2022–23 (AY 2023–24)
The income tax rates for FY 2021–22 (AY 2022-23) and FY (2022-23) under the previous tax system are listed below. Senior citizens and super senior citizens are eligible for a higher tax exemption level under the previous income tax system.
If a person reaches the age of 60 within the financial year, they are regarded as “Senior Citizens.” Similar to this, a person will be regarded as a super senior citizen if they turn 80 during the financial year.
| Income tax slab and rates for individuals below 60 years | |
| Net income range | Income tax rates |
| Up to Rs 2,50,000 | Nil |
| Rs 2,50,001 to Rs 5,00,000 | 5% of (total income minus Rs 2,50,000) |
| Rs 5,00,001 to Rs 10,00,000 | Rs 12,500 + 20% of (total income minus Rs 5,00,000) |
| Rs 10,00,001 and above | Rs 1,12,500 + 30% of (total income minus Rs 10,00,000) |
| Income tax slab and rates for senior citizens | |
| Net income range | Income tax rates |
| Up to Rs 3,00,000 | Nil |
| Rs 3,00,001 to Rs 5,00,000 | 5% of (total income minus Rs 3,00, 000) |
| Rs 5,00,001 to Rs. 10,00,000 | Rs. 10,000 + 20% of (total income minus Rs 5,00,000) |
| Rs 10,00,001 and above | Rs. 1,10,000 + 30% of (total income minus Rs. 10,00,000) |
| Income tax slab and rates for super senior citizens | |
| Net income range | Income tax rates |
| Up to Rs 5,00,000 | Nil |
| Rs 5,00,001 to Rs 10,00,000 | 20% of (total income minus Rs 5,00,000) |
| Rs 10,00,001 and above | Rs 1,00,000 + 30% of (total income minus Rs 10,00,000) |
How to calculate income tax liability under the previous tax system
It is crucial to understand which income tax bracket your income falls under if you have chosen to use the previous tax system for the current financial year. The tax rate at which every last rupee of your income will be taxed depends on the income slab rate that is relevant to it.
An individual taxpayer could use a number of tax deductions and exemptions under the previous income tax system to reduce their overall gross income. You will arrive at net taxable income once all allowable tax exemptions and deductions have been subtracted from the gross total income. On the basis of this income, a person will determine their tax liability.
Here is an example of how to compute the amount of income tax due under the previous tax system.
Let’s say a person under the age of 60 has a gross annual income of Rs. 17 lakh for the current financial year, which is FY 2022–23. A person has made the decision to choose the previous tax system for the current financial year. Additionally, he or she is qualified for the tax breaks and deductions listed in sections 80C for up to Rs. 1.5 lakh, 80CCD(1b) for NPS investments of Rs. 50,000, 80D for medical insurance subscription payments of Rs. 25,000, and 80TTA for interest on savings account earnings of Rs. 10,000.
| Calculating net taxable income under old tax regime | |
| Particulars | Amount (in Rs) |
| Gross total income | 17,00,000 |
| Section 80C | (1,50,000) |
| Section 80 CCD(1b) NPS investment | (50,000) |
| Section 80D – medical insurance premium | (25,000) |
| Section 80TTA | (10,000) |
| Net taxable income | 14,65,000 |
The net taxable income is Rs 14,65,000 after the deductions from the gross total income are subtracted. The net taxable income will be used to determine the amount of tax due.
The first Rs 2.5 lakh of net taxable income is exempt from tax, according to the income tax slab rates table. According to the present income tax slabs, there is no tax on income up to Rs 2.5 lakh. After this, Rs. 12,15,000 in income remains on which tax must be calculated (14,65,000-2,50,000). The second income tax bracket, which is taxed at 5%, is comprised of the amounts between Rs 2.5 lakh and Rs 5 lakh. Accordingly, the remaining Rs. 2,50,000 from the sum of Rs. 12,15,000 will be subject to a 5% tax. There will be a tax of Rs 12,500.
The remaining income that is still subject to tax is currently Rs 9,65,000. Rs 5 lakh and Rs 10 lakh, taxed at 20%, make up the third bracket in the income tax slab table. Out of Rs. 9,65,000, Rs. 5,000 will be subject to 20% tax. The amount of tax due here is Rs. 1,000,000.
Rs. 4,65,000 constitutes the remaining income on which tax must be computed. On the basis of the last slab, that is, above Rs 10 lakh at a rate of 30%, the tax amount on this remaining income (Rs 14,65,000 less Rs 10,00,000) will be determined. The whole amount of tax due comes to Rs 1,39,500.
As a result, an individual will owe a total of Rs. 2,52,000 in taxes (Rs. 12,500 + 1,00,000 + 1,39,500).
| Calculation of income tax payable for taxable income of Rs 14.65 lakh | ||
| Particulars | Income (Rs) | Tax amount (Rs) |
| Net taxable income | 14,65,000 | – |
| Income exempt up to Rs 2,50,000 | (2,50,000) | 0 |
| Income which is still chargeable to tax (Rs 14,65,000 – 2,50,000) | 12,15,000 | – |
| Income tax slab of Rs 2.5 lakh and up to Rs 5 lakh | (2,50,000) | @ 5% =12,500 |
| Income which is still chargeable to tax (Rs 12,15,000 – 2,50,000) | 9,65,000 | – |
| Income tax slab of Rs 5 lakh up to Rs 10 lakh | (5,00,000) | @20% = 1,00,000 |
| Income which is still chargeable to tax (Rs 9,65,000 – 5,00,000) | 4,65,000 | – |
| Income tax slab of above Rs 10 lakh | (4,65,000) | @ 30% =1,39,500 |
| Total income tax liability | – | 2,52,000 |
| Cess at 4% on total income tax payable (i.e. on Rs 2,52,000) | – | 10,080 |
| Final income tax liability (inclusive of cess) | – | 2,62,080 |
Please be aware that in addition to the income tax due, there are cess and surcharges. If the total income exceeds Rs. 50 lakh, a surcharge of 4% is imposed in addition to the 4% cess.
The cess amount in the aforementioned scenario is Rs 10,080. As long as net taxable income does not exceed Rs 50 lakh, the surcharge will not be applied. Individuals must pay a total of Rs. 2,62,080 in taxes.
Income tax rates for the financial years 2021–2022. (AY 2022-23) FY 2022-23 (AY 2023-24) (AY 2023-24) under the new tax system
An individual can choose to continue using the previous tax system (claiming deductions and tax exemptions) as of April 1, 2020 (FY 2020–21), or they can choose the new system, which offers no deductions or tax exemptions. The new tax system, which is optional in nature, offers a lower tax rate than the previous system.
The most recent tax rates and slabs for the financial years 2021–22 (also known as AY 2022-23) and 2022–23 are listed below (AY 2023-24)
| Income tax rates and slabs in new tax regime for FY 2021-22, FY 2022-23 | |
| Income tax slabs | Income tax rates |
| Up to Rs 2,50,000 | Nil |
| Rs 2,50,001 to Rs 5,00,000 | 5% of (total income minus Rs 2,50,000) |
| Rs 5,00,001 to Rs 7,50,000 | Rs 12,500 + 10% of (total income minus Rs 5,00,000) |
| Rs 7,50,001 to Rs 10,00,000 | Rs 37,500 + 15% of (total income minus Rs 7,50,000) |
| Rs 10,00,001 to Rs 12,50,000 | Rs 75,000 + 20% of (total income minus Rs 10,00,000) |
| 12,50,001 to 15,00,000 | Rs 1,25,000 + 25% of (total income minus Rs 12,50,000) |
| Above 15,00,001 | Rs 1,87,500 + 30% of (total income minus Rs 15,00,000) |
How to compute the income tax due under the new tax system
Here is how to determine the amount of income tax due if you have chosen the new tax structure 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 of 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 tax system.
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 their company. He can now claim a deduction under section 80CCD(2) of the Income-tax Act as a result.
| Calculating net taxable income under new tax regime | |
| Particulars | Amount (In Rs) |
| Gross total income | 20,00,000 |
| Deduction under section 80CCD (2) | 1,50,000 |
| Net taxable income | 18,50,000 |
Therefore, Rs. 18.50 lakh will be the net taxable income from which income tax has to be calculated (Rs 20 lakh minus Rs 1.5 lakh).
Up to Rs 2,50,000 of income are free from taxation under the new income tax system. Therefore, there won’t be any tax due on this revenue. After this, there is still Rs. 16,00,000 in revenue that must be taxed (Rs 18,50,000 minus Rs 2,50,000).
The following slab is from Rs 2.5 lakh to Rs 5 lakh. This means that 5% of the sum 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, there is still Rs. 13,50,000 in income that must be taxed (Rs 16,00,000 minus Rs 2,50,000). The following bracket ranges from Rs. 5 lakh to Rs. 7.5 lakh. The subsequent 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.
The remaining income is Rs. 11,000,000. (Rs 13,50,000 minus Rs 2,50,000). The following income tax bracket ranges from Rs 7.5 lakh to Rs 10 lakh. As a result, 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 for Rs. 37,500.
The remaining income that is still subject to tax is Rs. 8,50,000. (Rs 11,00,000 minus Rs 2.5 lakh). The following bracket ranges from Rs. 10 lakh 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.
The remaining income of Rs 6,00,000 is still subject to tax (Rs 8,50,000 minus Rs 2,50,000). 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 for Rs. 62,500.
The remaining income is currently Rs. 3,50,000. (Rs 6,00,000 minus Rs 2,50,000). This 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.
| Calculation of income tax payable for taxable income of Rs 18.50 lakh | ||
| Particulars | Income (Rs) | Tax amount (Rs) |
| Net taxable income | 18,50,000 | – |
| Income exempt up to Rs 2,50,000 | (2,50,000) | 0 |
| Income which is still chargeable to tax (Rs 18,50,000 – 2,50,000) | 16,00,000 | – |
| Income tax slab of Rs 2.5 lakh and up to Rs 5 lakh | (2,50,000) | @ 5% =12,500 |
| Income which is still chargeable to tax (Rs 16,00,000 – 2,50,000) | 13,50,000 | – |
| Income tax slab of Rs 5 lakh up to Rs 7.5 lakh | (2,50,000) | @ 10% = 25,000 |
| Income which is still chargeable to tax (Rs 13,50,000 -2,50,000) | 11,00,000 | – |
| Income tax slab of Rs 7.5 lakh up to Rs 10 lakh | (2,50,000) | @15% = 37,500 |
| Income which is still chargeable to tax (Rs 11,00,000 -2,50,000) | 8,50,000 | – |
| Income tax slab of Rs 10 lakh up to Rs 12.50 lakh | (2,50,000) | @ 20% = 50,000 |
| Income which is still chargeable to tax (Rs 8,50,000 -2,50,000) | 6,00,000 | – |
| Income tax slab of Rs 12.50 lakh up to Rs 15 lakh | (2,50,000) | @25% = 62,500 |
| Income which is still chargeable to tax (Rs 6,00,000-2,50,000) | 3,50,000 | – |
| Income tax slab of above Rs 15 lakh | (3,50,000) | @30% = 1,05,000 |
| Total income tax liability | – | 2,92,500 |
| Cess at 4% on total income tax payable (i.e. on Rs 2,92,500) | – | 11,700 |
| Final income tax liability (inclusive of cess) | – | 3,04,200 |
The total amount of tax due is Rs 2,92,500. The amount of the cess and surcharge must still be added, it must be noted.
Cess is assessed at a rate of 4% on the owed income tax. If your income is more over Rs 50 lakh, you must pay the fee.
The total tax is Rs 3,04,200 after a cess of Rs 11,700.
Comparison of the new and old income tax systems
Here is a comparison between the previous, existing income tax system and the new income tax system in terms of income tax slabs and rates.
| Income tax slabs and rates for individuals below 60 years of age, NRI and HUFs | ||
| Old tax regime (With deductions and exemptions) | Total income | New tax regime (without deductions and exemptions) |
| Nil | Up to Rs 2.5 lakh | NIL |
| 5% | From Rs 2,50,001 to Rs 5 lakh | 5% |
| 20% | From Rs 5,00,001 to Rs 7.5 lakh | 10% |
| From Rs 7,50,001 to Rs 10 lakh | 15% | |
| 30% | From Rs 10,00,001 to Rs 12.5 lakh | 20% |
| From Rs 12,50,001 to Rs 15 lakh | 25% | |
| From Rs 15,00,001 and above | 30% |
| Income tax slabs and rates for senior citizen (age above 60 years of age but below 80 years) | ||
| Old tax regime (With deductions and exemptions) | Total income | New tax regime (without deductions and exemptions) |
| Nil | Up to Rs 2.5 lakh | NIL |
| From Rs 2,50,001 to Rs 3 lakh | 5% | |
| 5% | From Rs 3,00,001 to Rs 5 lakh | |
| 20% | From Rs 5,00,001 to Rs 7.5 lakh | 10% |
| From Rs 7,50,001 to Rs 10 lakh | 15% | |
| 30% | From Rs 10,00,001 to Rs 12.5 lakh | 20% |
| From Rs 12,50,001 to Rs 15 lakh | 25% | |
| From Rs 15,00,001 and above | 30% |
| Income tax slabs and rates for super senior citizen (age above 80 years) | ||
| Old tax regime (With deductions and exemptions) | Total income | New tax regime (without deductions and exemptions) |
| Nil | Up to Rs 2.5 lakh | NIL |
| From Rs 2,50,001 to Rs 5 lakh | 5% | |
| 20% | From Rs 5,00,001 to Rs 7.5 lakh | 10% |
| From Rs 7,50,001 to Rs 10 lakh | 15% | |
| 30% | From Rs 10,00,001 to Rs 12.5 lakh | 20% |
| From Rs 12,50,001 to Rs 15 lakh | 25% | |
| From Rs 15,00,001 | 30% |
Every financial year, salaried people have the option of choosing between the new, concessional tax regime and the old, existing tax regime. However, according to tax experts, the new tax structure won’t be advantageous if a person deducts more than Rs 2.5 lakh in a fiscal year. Commonly used deductions include the 1.5 lakh rupee section 80C deduction, the 50,000 rupee standard deduction, the additional 50,000 rupee section 80CCD(1b) NPS deduction, the section 80D on health insurance premiums paid, etc.
Additional Income tax Surcharge
The surcharge is applied if a person’s net taxable income is higher than the predetermined threshold. The amount of income tax due before the cess is applied to the surcharge.
The income tax laws provide that a person’s total income (after taking all allowable deductions and tax exemptions) must not exceed Rs 50 lakh before a surcharge is levied.
| Income Tax Surcharge rates | |
| Income range | Surcharge rate |
| Up to Rs. 50 lakh | Nil |
| More than Rs 50 lakhs but up to Rs 1 crore | 10% |
| More than Rs 1 crore but up to Rs 2 crore | 15% |
| More than Rs 2 crore but up to Rs 5 crore | 25% |
| Above Rs 5 crore | 37% |
The aforementioned fee rates are subject to a few exclusions. Regardless of the range of income, the surcharge will not exceed 15% if a person has income from dividends, short- or long-term capital gains from the sale of equity shares and equity mutual funds, or other types of income. Be aware that beginning in the fiscal year 2023–24, a 15% surcharge will be applied to dividend income (AY 2023-24). According to the table above, a surcharge on dividend income from prior years (until FY 2022-23) will be applied.
In order to comprehend the idea of surcharge, one must also be familiar with the concept of marginal relief. When the amount of the income tax surcharge exceeds the rise in income above the designated threshold, the idea of marginal relief comes into play.
Assume that a person has a net taxable income of Rs. 51,000. The 10% surcharge will be applied as long as the income exceeds Rs 50 lakh. Without a surcharge, the tax owed on Rs. 51,000,00 is Rs. 13,42,500. There would be a surcharge of Rs 1,34,250.
Here, the surcharge amount (Rs. 1,34,250) exceeds the additional revenue beyond Rs (Rs 1,00,000). The idea of minimal alleviation comes into play at this point.
Calculating the income tax due on Rs. 50 lakh is necessary to determine the amount of the marginal reduction that is applicable. For the reason that there won’t be a surcharge until income exceeds Rs 50 lakh. The amount of income tax due is Rs 13,12,500. Add income over Rs. 50 lakh, or Rs. 1 lakh, to the amount of income tax owed. The amount of tax payable under marginal relief is Rs. 14,12,500.
One must compare the normal tax liability (before surcharge and cess) with tax liability after marginal tax relief in order to determine the actual income tax payable with surcharge (without cess). After marginal tax relief, the tax obligation is Rs. 14,12,500 as opposed to Rs. 13,42,500 under normal circumstances. The appropriate surcharge will be Rs 70,000. (Rs 14,12,500 – Rs 13,42,500).
The ultimate tax amount due will be calculated as follows: 13,42,500 (tax due amount) + 70,000 (surcharge) + 56,500 (4% cess on 14,12,500) = 14,69,000.
I hope, it would be helpful for your Tax Planning.
