Income Tax Slab Rates For FY 2023-24 and AY 2024-25 (New & Old Regime Tax Rates)

Any economy must comprehend taxes, and for Indian citizens, it is important to know the income tax slabs for the financial year 2023–24 (assessment year 2024–25). India has two different tax regimes: the current system has lower tax rates but fewer deductions, whereas the old regime has higher tax rates with deductions. We explore the specifics of these regimes in this piece to assist taxpayers in fulfilling their responsibilities and making the most out of their tax preparation techniques.

--------------Blog Contact Form-------------

What is an Income Tax Slab?

The predefined range of incomes on which various income tax rates are imposed is referred to as an income tax slab. Tax authorities use these slabs to classify people according to their income levels and calculate the total amount of taxes they must pay to the government.

Income tax slabs in India are divided into many categories, each with a separate tax rate.

The slabs show how annual income tax is calculated based on your earnings. If your income falls within a specific slab, the corresponding tax rate applies to that portion of your income. When your income increases and moves into higher slabs, higher tax rates are applied to those in higher income brackets.

Understanding the income tax slabs applicable to you is crucial as it allows you to estimate your tax liability, manage your finances accordingly, and ensure compliance with tax regulations. Moreover, different countries have their unique income tax slab structures and rates, which are customized to their individual economic and social policies.

The Old Tax Regime: Detailed Analysis

The traditional tax regime is based on a structure where individuals can make use of different deductions and exemptions available under various sections of the Income Tax Act. Here's a breakdown of the income tax slabs for the FY 2023-24 under the old regime:

In this system, taxpayers have the opportunity to avail deductions such as:

• Section 80C: Allowance for contributions in provident fund, PPF, life insurance premiums, etc., up to Rs. 1.5 lakh.
• Section 80D: Allowance for medical insurance premium paid for self, spouse, children, and parents.
• Section 24: Allowance for home loan interest up to Rs. 2 lakh for self-occupied property.

These deductions contribute to decreasing the taxable income, thus reducing the overall tax liability. The previous system is advantageous for individuals with substantial investments and eligible expenses.

Read Our Blog: What is the Tax Audit Limit For the AY 2023-24?

The New Tax Regime: Exploring Lower Rates

The new tax regime aims to simplify tax processes and minimize administrative complexities by offering lower tax rates compared to the traditional system. However, it involves the trade-off of removing most deductions and exemptions provided under the Income Tax Act. In the financial year 2023-24, individuals selecting this system will experience decreased tax rates across various income brackets, which range from 5% to 30%, depending on their income level. This approach is designed to streamline tax calculations and improve transparency, although individuals will no longer have the option to claim deductions, such as those under sections 80C, 80D, and others, which were accessible in the previous system. Here are the income tax slabs for FY 2023-24 under the new regime:

The new tax regime involves taxpayers giving up some deductions and exemptions available in the old tax system. Some common deductions and exemptions not permitted under the new regime include leave travel allowance, conveyance allowance, house rent allowance, relocation allowance, children education allowance, professional tax, daily expenses related to employment, helper allowance, deductions under Chapter VI-A (80C, 80D, 80E, etc.) excluding Section 80CCD (2), standard deduction on salary, interest on housing loan (Section 24), and other special allowances (Section 10(14)).

Comparison of Tax Rates Under New Tax Regime & Old Tax Regime

The Indian government, in the Union Budget 2020, introduced a new regime for individual taxpayers and gave an option to taxpayers to choose between the old regime with deductions and exemptions and the new regime with reduced tax rates but no exemptions and deductions. Here is the comparative detail of tax rates under both regimes:

Tax Rates for Individual Taxpayers (Below 60 Years):

Tax Rates for Senior Citizens (60 years and above but below 80 years)

Tax Rates for Super Senior Citizens (80 years and above)

Points to Note:

• Exemptions and Deductions: There are some exemptions and deductions in the old regime on HRA, LTA, and deductions under Sections 80C, 80D, 80E, etc. However, these exemptions and deductions are not allowed in the new regime.
• Rebate u/s 87A: In both regimes, a rebate of ₹ 12,500 shall be available to persons having taxable income of up to ₹ 5,000,000.
• Option of Regime: The regime will allow an option between the old and new tax regime, whichever is more beneficial to the financial situation of taxpayers. It will allow year-by-year choice for salaried and at the time of filing returns in case of non-salaried people.
• Surcharge and Cess: Rates of surcharge are the same in both regimes. However, the health and education cess is 4%.

Comparative Analysis: Which Income Tax Regime Should You Choose?

Selecting between the previous and current tax regimes is mostly determined by your unique financial circumstances and tax preparation approach: 

• Old Regime Advantages: Best suited for taxpayers having sizable assets in tax-deductible products like life insurance, PPF, and house loans.
• New Regime Advantages: Provides reduced tax rates for a range of income slabs, making it appropriate for people with fewer deductions or who want easier tax compliance.
• Under the Old Regime: After deducting things like 80C, 80D, and so forth, the tax burden would be calculated, which might drastically lower the taxable income.
• Under the New Regime: Tax rates are immediately applied to taxable income, resulting in a different tax liability, although no deductions are permitted.

What are the Major Procedural Changes in Filing of Income Tax Return from FY 2022-23 to FY 2023-24?

1. Previously, applied the default regime: the Old tax regime for FY 2022-23. If you wished to apply the new tax regime, you had to file Form 10-IE. Since now, after the due date, you have to mandatorily file under the old regime only.
2. For the FY 2023-24, the default regime on the change to New Tax Regime, now if you file the return in the Old tax regime claiming all the deductions, exemptions, and losses, then you are compulsorily required to file Form 10 IEA within the due date after the due date has expired, you are required to file compulsorily in the New Regime while doing away with most of the deductions and exemptions including all losses.

When can a person opt for an old vs new regime?

Additional Considerations: Surcharge and Cess

Irrespective of the chosen regime, taxpayers should take note of extra fees:

• Extra Charge: Applied at 10% on income falling between Rs. 50 lakhs and Rs. 1 crore, and at 15% on income exceeding Rs. 1 crore.
• Cess for Health & Education: Imposed at 4% on the total tax liability, including the extra charge.

These elements contribute to the overall tax rate and must be considered in tax planning calculations.

Conclusion: Making Informed Tax Decisions

For income tax brackets for FY 2023-24 & AY 2024-25, every taxpayer needs to grasp the intricacies of both the old and new tax systems. Whether it's about maximizing deductions in the old system or choosing the simplicity of lower rates in the new system, the decision ultimately relies on individual financial goals and circumstances.

By staying well-informed and seeking advice from tax professionals when needed, taxpayers can effectively handle their tax responsibilities and optimize their financial planning strategies following the current tax laws and regulations.

Understanding these intricacies enables taxpayers to make informed choices, ensuring compliance with tax obligations while maximizing the benefits available under the Income Tax Act.