Every taxpayer in India should understand the income tax* slab to pay their income tax liability based on the tax provisions stated under Income Tax Act, 1961. Budget 2020 introduced the new income tax slab rates for AY 2021-22 onwards.

However, the taxpayers can choose between the old regime and the new tax regime to benefit from the tax provisions maximally based on their income and financial investments for the AY 2022-23. To understand the two regimes, here is a complete guide to the income tax slabs for AY 2022-23.

What is the Income Tax Slab?

Income tax in India is based on the total income earned by the taxpayer. The tax rate is applied based on the income range referred to as the income tax slab. The Finance Minister will announce the income tax slab every year in the Union Budget. Here is a detail about the income tax slab for the AY 2022-23.

Income Tax Slabs for AY 2022-23

The income tax slab rate is defined based on the category of individuals and age.

• For individuals (resident or non-resident), HUF, Association of Person or Body of Individual other than senior and super senior citizen, the income tax slab is as follows:

• For senior citizens

• For super senior citizens

The Finance Act 2020 allowed individuals and HUF to pay taxes at reduced rates from the AY 2021-22 onwards based on the following new income tax slab:

• Health and Educational Cess of 4% is applicable on the amount of income tax including the surcharge for both the regimes.
  
  
• A rebate of ₹12,500 is applicable on both regimes for income not exceeding ₹5,00,000.

The surcharge is levied on the income tax amount if the total income exceeds the specific limits based on the following rates:

Based on the individual case, the surcharge of 25% and 37% will not be levied from the income that is chargeable to tax under Sections 111A, 112A and 115AD. Therefore, the maximum surcharge rate on the tax payable for such incomes shall remain 15%. However, there will be a marginal relief from such surcharge payments and do refer to it if you have an extreme income.

Pointers Concerning New Tax Slab

• File Income Tax Return (ITR) on or before the due date, 31st July 2022, for the AY 2022-2023.
  
  
• Individuals or HUFs who do not have a business income can choose between the old and new tax slabs.
  
  
•  Taxpayers with a business income can opt for the new tax regime. However, once done, they will get one opportunity to switch to the old tax regime in their lifetime until they cease the source of the business income.
  
  
• The new tax slab does not allow a few tax deductions and exemptions, such as
  
  
  • The standard deduction under Section TTA or Section TTB
  • Professional tax
  • Entertainment allowance
  • House rent allowance
  • Leave travel concession
  • Minor child income allowance
  • Child education allowance
  • Other special allowances
  • Exemptions and deductions based on any other perquisites
  • Interest on housing loan of a vacant property or self-occupied property
  • Deductions under Section 80C, Section 80D, Section 80E, Section 80G, etc.,
  
  

Therefore, taxpayers with investments eligible for deductions can choose the old income tax slab regime and the others, the new income tax* slab regime, for maximal benefits. And, if your salary structure can help you save on tax* based on the allowances, then the old tax slab regime will be ideal.



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Conclusion



Income tax slab refers to the income range based on which the tax rate applies to every taxpayer's taxable income. The Finance Minister announces the income tax slab every year. For the AY 2022-23, there are two types of income tax slab regimes applicable to the different taxpayers.



While the new tax slab provides reduced rates, the old tax regime helps taxpayers benefit from the tax deductions and exemptions. Therefore, if you have been making investments for your long-term benefit, choose the old income tax slab and the applicable rates!



L&C/Advt/2022/Nov/2928