Income Tax Slab Fy 2023-24: Revised income tax slabs, rates for new tax regime announced in Budget 2023

Basic exemption limit has been hiked to Rs.3 lakh from Rs 2.5 currently under the new income tax regime in Budget 2023. Further, the income tax slabs in the new tax regime has been changed. According to the announcement, 5 income tax slabs will be there in FY 2023-24, from 6 income tax slabs currently. A rebate under Section 87A has been enhanced under the new tax regime; from the current income level of Rs.5 lakh to Rs.7 lakh. Thus, individuals opting for the new income tax regime and having an income up to Rs.7 lakh will not pay any taxes.

The income tax slabs under the new income tax regime will now nbe as follows:

1. Rs 0 to Rs 3 lakh – 0% tax rate
2. Rs 3 lakh to 6 lakh – 5%
3. Rs 6 lakh to 9 lakh – 10%
4. Rs 9 lakh to Rs 12 lakh – 15%
5. Rs 12 lakh to Rs 15 lakh – 20%
6. Above Rs 15 lakh – 30%

The revised Income tax slabs under new tax regime for FY 2023-24 (AY 2024-25)

Further, the new income tax regime becomes the default tax regime. However, the individuals will have an option to continue with the old income tax regime. The government has reduced the surcharge of the highest rate from 37% currently to 25% in new tax regime.

Shailini Jain, Tax Partner, EY India, says, “In line with the expectations of making new tax regime more attractive for individuals, the Finance Minister has announced new income slabs bringing down the overall tax outgo for the middle-income-earner group in FY 2023-24.”

What are the current income tax slabs?
The new tax regime was announced in Budget 2020 and became effective from financial year 2020-21 (April 1, 2020). Currently, a salaried individual gets the option to opt for the old tax regime and continue to avail common tax deductions and tax exemptions. Else, he/she can opt for the new concessional income tax regime, without any common tax deductions and tax exemptions. Under the new tax regime, the individual will forego 70 deductions and tax exemptions, which includes HRA tax exemption, LTA tax exemption, deduction up to Rs 1.5 lakh under Section 80C and so on.

The new tax regime was announced for individuals who were unable to claim the benefits of the deductions and tax exemptions available. It also helps to ease the compliance burden for the salaried taxpayers. Currently, the new tax regime offers 6 tax slabs and lower tax rates as compared with the old income tax regime.

Income tax slabs and rates for resident individuals below 60 years of age, NRI and HUFs

*Cess will be levied at rate of 4% on income tax amount. Surcharges will be levied on incomes above Rs 50 lakh.

According to the income tax laws, a salaried person can opt for the new tax regime as per their convenience in every financial year. In case an individual has a business income, they cannot choose the tax regime as per their convenience every year. If they opt for the new tax regime, they can switch back to the old tax regime only once in their life.

Individual having net taxable income up to Rs 5 lakh will not be required to pay any tax in both the regimes as rebate under Section 87A is available in both tax regimes. However, they will be required to file income tax return.

Do keep in mind that under both the tax regimes the basic tax exemption limit is Rs 2.5 lakh for individuals below the age of 60 years during the financial year. However, for senior citizens (above 60 years but below 80 years) and super senior citizens (above 80 years of age) the basic tax exemption limit is Rs 3 lakh and Rs 5 lakh, respectively, in the old tax regime. In the new tax regime, the basic tax exemption limit is Rs 2.5 lakh irrespective of the age of the taxpayer.