Income Tax Slabs for FY 2022-23
Income Tax is the tax that is levied by the Government of India on the income earned by individuals and other entities like a Hindu Undivided Family or a Company. This is based on various slabs as decided by the GOI
Announcement of slabs, tax rates for various slabs, and the exemptions allowed happening during the presentation of the Annual Budget.
Knowing your income tax slabs is very important so that you are able to carry out an efficient tax planning exercise well in time.
Income Tax Slabs for the Financial Year 2020-21
Before getting to know the income tax rates for particular slabs for the ongoing financial year, let us know the individual categories of taxpayers.
- Individuals (below the age of 60 years), consisting of residents and non-residents Indians (NRIs)
- Resident senior citizens - in the age group of 60 years to 80 years
- Resident super senior citizens -aged 80 and above
Another important point to be noted here is that the Annual Budget of 2020 has announced a new tax slab for individuals. There are many calculators available online to see which tax regime works best for your income level. Do a thorough calculation before making the switch to the new regime.
The Tax Regime Applicable for the Financial Year 2020-21 (Assessment Year 2021-22)
Tax slabs for individuals below 60 years
Tax Slabs for Resident Individuals in the Age Group of 60-80 (Senior Citizens) for the Financial Year 2020-21
Individuals in the age group of 60-80 are categorized as Senior Citizens. The tax rates for this group are slightly different under the old regime.
Tax Slabs for Resident Individuals Aged 80 and Above (Super Senior Citizens)
The individuals aged 80 and above are categorized as Super Senior Citizens and any income of up to Rs 5 lakh is exempt from tax.
Additional Surcharge
For those individuals earning an income above Rs 50 lakh, a surcharge at the rate mentioned below is applicable. Luckily the surcharge rates remain the same even in the new tax regime.
Note:
- Health and Education Cess of 4% is charged on all Income Tax slabs on the total amount of Income Tax+surcharge payable
- A tax rebate of Rs 12500 under Sec 87A of Income Tax Act is available for individuals(only resident Individuals) whose taxable income is up to Rs 5 lakh even in the new tax regime.
Tax Exemptions Dropped under the New Tax Regime
Any individual looking to move to the new tax regime should bear in mind that he/she will have to give up the tax exemptions that were available under the old regime. 70 exemptions were dropped from the Income Tax exemption list.
Some of the common exemptions especially the ones under Sec 80C that will not be allowed if you opt for the new tax regime are
- Standard deduction of Rs 50,000
- House rent allowance (HRA): Varying amounts depending upon the salary structure and rent paid
- Housing loan interest allowed under Section 24 of up to Rs 3.5 lakh for those claiming under affordable housing, Rs 2 lakh for others
- Investments under Sec 80C: Rs 1.5 lakh
- Leave travel allowance: Tax-free if claimed once in a block of two years
- NPS contribution: Rs 50,000
- Medical insurance premium: Rs 25,000 (Rs 50,000 for parents and senior citizens)
- Savings bank interest: Rs 10,000
- Children Education Allowance: Rs 2250 per child/ Rs 6750 for hostel subsidy Professional Tax
- Donations under Section 80G
Deductions that Continue to Be Admissible
The Finance Act 2020 has allowed some deductions as below to be admissible as earlier. They are
- The only deduction that is still available under the Section 80C benefits is the benefit under Sec 80CCD (2). This section allows deduction on the employer's contribution to the NPS account for a maximum of 10% of the employee's salary (salary here means basic plus dearness allowance).
- Transport Allowance granted to a divyang (disabled) employee to meet the expenditure for the purpose of commuting between place of residence and place of duty
- Conveyance Allowance granted to meet the expenditure on conveyance in performance of duties of an office
- Any Allowance granted to meet the cost of travel on tour or on transfer
- Daily Allowance to meet the ordinary daily charges incurred by an employee on account of absence from his normal place of duty.
With the new tax regime, the options for tax saving with the help of deductions have been reduced. However, to compensate for this, the tax rate has also been reduced. Look at the exemptions that you have been claiming to make the right decision of opting for the regimes. Remember, while salaried employees have the option to pick the tax regime most suitable to them every financial year, those with salaried and business income should make their decision carefully. After moving to the new regime, they will be able to make the choice to move to the old regime only once in their lifetime.
