Income tax in India works like this: the more you earn, the higher the tax you pay. The tax rates vary based on income brackets, and they change every financial year. This year, the government made some changes for the fiscal year 2023-24.
Income Tax Slabs: What Are They?
Income tax slabs are different income ranges with corresponding tax rates. They’re categorized based on factors like age, income amount, and residential status. In India, there are three main categories:
- Individuals below 60 years
- Senior citizens aged between 60 and 80
- Super senior citizens above 80
The New Income Tax Slabs
Starting from April 1, 2023, there are key changes in the tax slabs:
- For the New Tax Regime:
- Income up to Rs. 3,00,000: No tax
- Rs. 3,00,000-6,00,000: 5%
- Rs. 6,00,000-9,00,000: 10%
- Rs. 9,00,000-12,00,000: 15%
- Rs. 12,00,000-15,00,000: 20%
- Above Rs. 15,00,000: 30%
- For the Old Tax Regime:
- Income up to Rs. 2,50,000: No tax
- Rs. 2,50,000-5,00,000: 5%
- Rs. 5,00,000-10,00,000: 20%
- Above Rs. 10,00,000: 30%
Old vs. New Tax Regime
There’s a choice between the old and new regimes. The new regime tends to have lower tax rates for higher incomes, but it doesn’t allow many deductions or exemptions. The old regime offers more deductions, making it favorable for those keen on tax savings through investments.
Exemptions and Deductions Unavailable in the New Regime
Under the new regime, many exemptions are unavailable, including deductions for HRA, LTA, Section 80C, and more. This limits tax-saving opportunities.
Exemptions and Deductions Available in the New Regime
Some deductions and exemptions are still available in the new regime, such as employer contributions to NPS and certain allowances for employees.
Benefits and Disadvantages
The old regime offers numerous deductions and exemptions, making it attractive for tax savings but often requiring specific investments. On the other hand, the new regime offers reduced tax rates but limits tax-saving options, which might not suit individuals already invested in tax-saving avenues.
Understanding these income tax slabs and regimes can help you make informed decisions about how you want to manage your taxes for the upcoming fiscal year. Always consider consulting a tax expert for personalized advice.
