Income Tax Slabs In India For FY 2022-23: New Tax Regime Vs Old Tax Regime

Income Tax

Any reforms in income tax or income tax slabs are announced by the Finance Minister of India, usually during the Union Budget . Right now, there are two income tax slabs or regimes in India – the new and the old tax regime. So, which income tax slab is better for you, the new or the old?

You can get a comprehensive rundown of income tax slabs under both regimes in the following sections.

Income Tax Slab: What Is it? 

Income tax in India is levied through a slab system. The system refers to different tax rates that are meant for individuals earning different ranges of income. The income tax rate goes up as your annual income increases. 

This kind of taxation system is subject to change every year. The tax slab rates are different for these age groups:

• Individuals below 60 years
• Individuals between 60 years to 80 years
• Senior residents above 80 years

Also Read: Get Tax Reductions For Medical And Health Insurance Under Section 80D

Income Tax Slabs FY 2022-23: New & Old Income Tax Regime

The New Regime gives taxpayers the option to choose from the following: 

1. As per the New Tax Regime, income tax can be paid at lower rates with a condition that forgoes certain permissible exemptions and deductions that are already available.
2. To continue to pay taxes under the existing tax rates. Rebates and exemptions can be availed by being under the old regime but at the existing higher rate.

Conditions for Opting for New Tax regime

While the taxpayer opts for paying tax via the New Tax Regime, the payer has to forgo certain exemptions and deductions that exist in the old tax regime. Some deductions and exemptions that are not allowed in the New Tax Regime are listed below: 

• Leave Travel allowance / LTA
• House Rent allowance / HRA
• Conveyance allowance
• Daily expenses while employed
• Relocation allowance
• Child education allowance
• Special allowances as listed under Section 10(14)
• Professional tax
• Interest on housing loan as listed under Section 24
• Deduction under Chapter VI-A deduction (80C,80D, 80E and so on) (Except Section 80CCD(2))

Deductions allowed under the New Tax Regime are listed below:

• For specially-abled payers, transport allowance would be allowed.
• Investment in NPS (National Pension Scheme) as listed under 80CCD(2).
• Deduction for employment of new employees under section 80JJAA
• Any allowance for travelling for employment or on transfer

New Tax Regime Slabs for FY 22-23

The new income tax slab provides a singular income tax structure across all categories, such as HUF, individuals below 60, senior citizens and super senior citizens. However, the new tax regime is optional, and you have the right to choose between the old and the new one. 

Current income tax slabs as per the new tax regime is as follows: 

An additional 4% cess is levied on the income tax amount for all individuals. Also, if you have a total taxable income of up to Rs. 5 lakh, you can seek a rebate under Section 87A. This means your tax liability will be zero under both new and old tax regimes. 

Also Read: Taxation In Mutual Funds

Income Tax Slab for Old Regime

Income tax rates under the old regime vary based on the age groups to which individual taxpayers belong. Let’s check the rates for each age group in the following sections:

Individuals below the age of 60 years

Individuals between 60 and 80 years

Individuals above 80 years

Similar to the new tax regime, there is a 4% cess on the taxable amount across all age groups. 

Calculating Income Tax in Different Tax Regimes

To let you have a clear understanding of the tax rates under the new and old slabs, let’s take a look at this example:

Mr. Mehra has an annual income of Rs. 10,00,000. He has a total investment of Rs. 1,70,000 under Section 80C in PF, ELSS, life insurance premium, home loan principal payment. In addition, he pays medical insurance of Rs. 28,000. If he goes for the old regime, he can opt for tax deductions.

However, with the new tax regime, he cannot seek any exemption. Suppose the amount of home loan interest paid by him for FY20-21 is Rs. 75,000. 

Let’s check the income tax payable under both regimes:

Which Income Tax Regime is Better: Old or New Tax Regime?

Eligible deductions will differ from person to person, applying a standard rule for all will be ruled out. Taxpayers will need to evaluate and compare the tax liability under both regimes and then decide on which to opt for. 

Tax-payers who have a taxable income of INR 15 Lakh can overall take a good benefit by opting for the new tax regime. Payers who make low investments can also benefit from this regime. If the payer opts for concessional tax rates, the payer would have to evaluate both the regimes and choose the most beneficial one. Hence a comparative analysis and evaluation is advisable before opting for a regime. 

Let’s check how two salaried taxpayers have the same gross income but are eligible for different tax deductions/exemptions with no other source of income.

Based on the above table, let us find out which tax regime benefits both taxpayer A and B :

In this case, the old regime proves beneficial for Tax Payer A since he pays less tax as compared to the new regime.

In this case, where HRA and LTA are not deducted and not applicable, the new tax regime proves beneficial for Tax Payer B.

Surcharge rates Applicable to Income Tax

Income tax surcharge is the additional tax liability that a payer pays based on the income above the mentioned limit during the mentioned financial year.

The rates differ for each payer based on their income.

Let’s look at the surcharge rates for various taxpayers as per their net income: 

Income Tax Rates for Women

Previously women had to pay slightly lower income tax than men. However, the income tax rates for men and women have become the same since FY 2012 -13. There are no specific exemptions for women taxpayers anymore. 

Final Word

You can choose to pay your income tax by option for any of the two regimes. However, it is best to evaluate the advantages and downsides of each of the tax regimes to find out which one would be most suitable for you. 

FAQs on Income Tax Slabs

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This article has been prepared on the basis of internal data, publicly available information and other sources believed to be reliable. The information contained in this article is for general purposes only and not a complete disclosure of every material fact. It should not be construed as investment advice to any party. The article does not warrant the completeness or accuracy of the information, and disclaims all liabilities, losses and damages arising out of the use of this information. Readers shall be fully liable/responsible for any decision taken on the basis of this article.