The Indian income tax system is structured around tax slabs that determine how much income tax an individual must pay in a given financial year. For the assessment year 2023-24, which corresponds to the financial year 2022-23, taxpayers have the option to choose between two tax regimes: the old tax regime and the new tax regime. Each regime comes with its own set of tax slabs, deductions, and exemptions. Understanding the tax slab 2023-24 is essential for accurate tax planning and compliance.
Overview of Tax Regimes
The Indian government introduced a new tax regime in Budget 2020 with the aim of simplifying the taxation system. Taxpayers can choose between the old regime, which offers various deductions and exemptions, and the new regime, which offers lower tax rates but removes most exemptions.
Choosing Between Old and New Tax Regimes
Taxpayers need to evaluate which regime is more beneficial based on their income, investments, and eligibility for deductions. Salaried employees can switch between regimes each year, while those with business income can opt in or out only once.
Income Tax Slabs for Assessment Year 2023-24
New Tax Regime (Optional)
The new tax regime offers concessional tax rates but without most deductions such as Section 80C, HRA, or LTA. Below are the applicable tax slabs under this regime for individuals and HUFs:
- Income up to ₹2.5 lakh – Nil
- ₹2.5 lakh to ₹5 lakh – 5%
- ₹5 lakh to ₹7.5 lakh – 10%
- ₹7.5 lakh to ₹10 lakh – 15%
- ₹10 lakh to ₹12.5 lakh – 20%
- ₹12.5 lakh to ₹15 lakh – 25%
- Above ₹15 lakh – 30%
Note: A rebate under Section 87A is available for income up to ₹5 lakh, making the effective tax zero for such taxpayers even under the new regime.
Old Tax Regime (With Deductions and Exemptions)
The old regime continues to allow common exemptions and deductions like HRA, standard deduction, Section 80C, 80D, and others. The tax slabs for individual taxpayers below 60 years of age are as follows:
- Income up to ₹2.5 lakh – Nil
- ₹2.5 lakh to ₹5 lakh – 5%
- ₹5 lakh to ₹10 lakh – 20%
- Above ₹10 lakh – 30%
Senior citizens (aged 60-80 years) get a higher basic exemption of ₹3 lakh, and super senior citizens (above 80 years) get an exemption of ₹5 lakh under this regime.
Surcharge and Cess
In both regimes, the following surcharge and health & education cess are applicable:
Surcharge on Income
- 10% on income between ₹50 lakh and ₹1 crore
- 15% on income between ₹1 crore and ₹2 crore
- 25% on income between ₹2 crore and ₹5 crore
- 37% on income above ₹5 crore
Health and Education Cess
4% cess is applicable on the total tax liability, including surcharge, under both tax regimes.
Tax Rebates and Reliefs
Section 87A Rebate
Under both the new and old regimes, if your total income is up to ₹5 lakh, you are eligible for a rebate of ₹12,500. This makes your total tax liability zero.
Relief under Section 89
If you receive salary arrears or advance salary, you may be eligible for relief under Section 89 to avoid being taxed at a higher slab due to a one-time income spike.
Comparison of Old vs New Tax Regime
Taxpayers must assess their eligible deductions to decide between the two regimes. Below is a simple comparison:
New Tax Regime Benefits
- Lower tax rates
- Simplified structure without complex exemptions
- Better for those with limited investments or deductions
Old Tax Regime Benefits
- Availability of standard deduction
- Deductions under Section 80C, 80D, HRA, etc.
- Ideal for taxpayers with high investments and insurance premiums
Impact on Different Taxpayers
Salaried Employees
Salaried individuals with allowances like HRA, LTA, and who contribute to provident funds or insurance policies might find the old regime more beneficial. However, those without such benefits may pay less under the new regime.
Self-Employed and Business Owners
Business owners are allowed to choose the new regime only once unless they change their business. They must weigh the benefit of deductions like depreciation, business expenses, and Section 80 deductions before making the switch.
Examples of Tax Calculation
Example 1 – Old Regime
Suppose your gross income is ₹10 lakh. You claim deductions of ₹1.5 lakh under Section 80C and ₹25,000 under Section 80D. Your taxable income becomes ₹8.25 lakh.
Tax liability under the old regime:
- 0 – ₹2.5 lakh: Nil
- ₹2.5 – ₹5 lakh: 5% = ₹12,500
- ₹5 – ₹8.25 lakh: 20% = ₹65,000
- Total: ₹77,500 + cess
Example 2 – New Regime
Same gross income of ₹10 lakh, but no deductions allowed.
Tax liability under new regime:
- 0 – ₹2.5 lakh: Nil
- ₹2.5 – ₹5 lakh: 5% = ₹12,500
- ₹5 – ₹7.5 lakh: 10% = ₹25,000
- ₹7.5 – ₹10 lakh: 15% = ₹37,500
- Total: ₹75,000 + cess
In this case, the new regime could be more favorable if the deductions are not significant.
The tax slab 2023-24 structure gives Indian taxpayers the flexibility to choose a tax regime based on their financial planning and investments. While the new regime offers lower rates and simplicity, the old regime is still useful for those who actively invest in tax-saving instruments. Careful comparison and planning are essential to select the regime that minimizes tax outflow while aligning with one’s long-term financial goals. Always consider consulting a tax advisor or using online tax calculators to determine which regime works best for your income profile.