In India, income tax is calculated based on income levels, which are set in tax slabs each year. These slabs differ under the old and new tax systems. For this year, starting in April, the income tax slabs are for the financial year 2024-25, and taxes will be filed in the assessment year 2025-26. Different income levels have different tax rates, so as income goes up, the tax rate also increases. The Income Tax Department of the government manages this system to ensure a fair and progressive way of taxing.
Income Tax Slabs Under New Tax Regime for FY 2023-24, FY 2024-25
The new tax regime introduced in Budget 2023 offers lower tax rates but does not allow most of the deductions and exemptions available under the old tax regime. Here are the income tax slabs for individuals under the new tax regime for FY 2023-24 (AY 2024-25):
- Up to Rs. 3,00,000: NIL
- Rs. 300,001 to Rs. 6,00,000: 5% (Tax Rebate u/s 87A)
- Rs. 6,00,001 to Rs. 900,000: 10% (Tax Rebate u/s 87A up to Rs 7 lakh)
- Rs. 9,00,001 to Rs. 12,00,000: 15%
- Rs. 12,00,001 to Rs. 1500,000: 20%
- Above Rs. 15,00,000: 30%
Income Tax Slabs Under Old Tax Regime
The old tax system lets taxpayers claim different deductions and exemptions, like House Rent Allowance (HRA), Leave Travel Allowance (LTA), and deductions under Sections 80C, 80D, and others. It’s divided into three categories.
The old tax system under the Income Tax Act, 1961, has different tax slabs for:
- Indian residents under 60 years old and all non-residents
- Residents aged 60 to 80 years, called Senior Citizens
- Residents over 80 years, called Super Senior Citizens
For Individuals (Below 60 Years) and HUF
- Up to ₹2.5 lakh: Nil
- ₹2,50,001 to ₹3 lakh: 5%
- ₹3,00,001 to ₹5 lakh: 5%
- ₹5,00,001 to ₹10 lakh: 20%
- Above ₹10 lakh: 30%
For Senior Citizens (60 Years and Above but Below 80 Years)
- Up to ₹2.5 lakh: Nil
- ₹2,50,001 to ₹3 lakh: Nil
- ₹3,00,001 to ₹5 lakh: 5%
- ₹5,00,001 to ₹10 lakh: 20%
- Above ₹10 lakh: 30%
For Super Senior Citizens (80 Years and Above)
- Up to ₹2.5 lakh: Nil
- ₹2,50,001 to ₹3 lakh: Nil
- ₹3,00,001 to ₹5 lakh: Nil
- ₹5,00,001 to ₹10 lakh: 20%
- Above ₹10 lakh: 30%
Why are The Changes Announced in the New Tax Regime in Budget
In the 2023 budget, Finance Minister Nirmala Sitharaman announced updates to the new tax system for the Financial Year 2023-24 and Assessment Year 2024-25. Here are the key changes:
Higher Basic Exemption: The basic exemption limit is now ₹3 lakh, up from ₹2.5 lakh.
Updated Tax Slabs:
- Income up to ₹3 lakh: No tax
- ₹3 lakh to ₹6 lakh: 5% tax
- ₹6 lakh to ₹9 lakh: 10% tax
- ₹9 lakh to ₹12 lakh: 15% tax
- ₹12 lakh to ₹15 lakh: 20% tax
- Above ₹15 lakh: 30% tax
- Standard Deduction: A ₹50,000 standard deduction is introduced for salaried individuals, and a deduction up to ₹15,000 is available for family pensioners.
- Rebate Under Section 87A: Individuals with income up to ₹7 lakh will pay no tax under the new regime.
- Default Tax Regime: The new tax system is now the default, but taxpayers can still choose the old system if they prefer.
- Reduced Surcharge: The highest surcharge rate is reduced from 37% to 25%.
Income Tax Slabs for Companies/Businesses (FY 2023-24)
For Domestic Companies:
- Standard corporate tax rate: 30%.
- Companies with turnover up to ₹400 crore: 25%.
- New companies under Section 115BAB (set up on/after October 1, 2019, and started manufacturing by March 31, 2023): 15%.
- Companies under Section 115BAA (without certain deductions or incentives): 22%.
- Companies under Section 115BA (registered on/after March 1, 2016, in manufacturing): 25%.
Surcharge & Cess for Companies
- Domestic companies with income over ₹1 crore up to ₹10 crore: 7% surcharge.
- Domestic companies with income over ₹10 crore: 12% surcharge.
- Health & Education Cess: 4% for all companies.
For Partnership Firms or LLP Companies:
Standard Tax Rate: 30% for domestic companies.
Surcharge & Cess:
- Companies with income over ₹10 crore have a 12% surcharge.
- All companies pay an additional Health & Education Cess of 4%.
For Foreign Companies:
Standard Tax Rate: 40%.
Royalty Income and Technical Service Fees: Earnings from royalties and technical services provided to the Indian government are taxed at 10%.
Surcharge & Cess:
- Companies with income over ₹1 crore but up to ₹10 crore have a 2% surcharge.
- Companies with income over ₹10 crore have a 5% surcharge.
- All companies pay an additional Health & Education Cess of 4%.
