At present, there are two Income tax slabs from which a salaried person will be able to select every year, tax rates are different for these slabs. Old Income Tax Regime continues with the existing tax deductions and exemptions where as the new Income Tax Regime offers lower income tax rates and more slabs having no option of availing benefit of tax exemptions and deductions. The tax slabs under the new regime has been revised from April 1, 2023.
Basic exemption limit has been increased to INR 3 Lakh from INR 2.5 Lakh under the new tax regime in Budget 2023. Further, the income tax slabs in the new tax regime has also been changed. As per the announcement, income tabs slabs are going to be 5 in FY 2023-24 from 6 income tax slabs at present. Under section 87A rebate has been enhanced under the new tax regime from the current income level of INR 5 Lakh to INR 7 Lakh. Hence, individuals opting for the new income tax regime and having an income range up to INR 7 Lakh will not pay any taxes.
The income tax slabs under the new income tax regime are as follows:
Rs 0 to Rs 3 lakh - 0% tax rate
Rs 3 lakh to 6 lakh - 5%
Rs 6 lakh to 9 lakh - 10%
Rs 9 lakh to Rs 12 lakh - 15%
Rs 12 lakh to Rs 15 lakh - 20%
Above Rs 15 lakh - 30%
*Cess will be levied at rate of 4% on income tax amount. Surcharges will be levied on incomes above Rs 50 lakh.
In Addition, the new income tax regime will be the default tax regime. The individual will not be having 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 the new income tax regime.
Do remember, under both the tax regimes the basic tax exemption limit for individuals below the age of 60 years is INR 2.5 Lakh during the financial year. However, for the senior citizens whose age is above 60 years but below 80 years the basic tax exemption limit is INR 3 Lakh, For the senior citizens whose age is above 80 years the basic tax exemptions limit is INR 5 Lakh respectively in old tax regime. In the new tax regime, the basic tax exemption limit is INR 2.5 Lakh irrespective of the age of the tax payer.