The income tax slab rate is the percentage of tax you pay on your income, determined by the income range you fall into. This rate varies for different taxpayer categories, such as individuals, HUFs, and companies. It also changes annually based on government budget announcements.
This blog post explores the income tax slab rate for FY 2023-24, AY 2024-25, as proposed in the Finance Bill, 2023. We'll also compare the new and old tax regimes to help you decide which one suits you better.
Income Tax Slab Rate for FY 2023-24, AY 2024-25: New Tax Regime vs Old Tax Regime
The Finance Bill, 2023, introduced some major changes to the income tax slab rates for FY 2023-24, AY 2024-25, especially for the new tax regime. Introduced in the previous budget, the new tax regime is an optional alternative to the old regime. It offers lower tax rates but comes with fewer deductions and exemptions.
The following table shows the income tax slab rate for FY 2023-24, AY 2024-25, under both the new tax regime and the old tax regime, for individuals, HUFs, AOPs, BOIs, and AJPs.
| Income Range | New Tax Regime | Old Tax Regime |
|---|---|---|
| Up to Rs. 2.5 lakh | Nil | Nil |
| Rs. 2.5 lakh to Rs. 5 lakh | 5% | 5% |
| Rs. 5 lakh to Rs. 7.5 lakh | 10% | 10% |
| Rs. 7.5 lakh to Rs. 10 lakh | 15% | 15% |
| Rs. 10 lakh to Rs. 12.5 lakh | 20% | 20% |
| Rs. 12.5 lakh to Rs. 15 lakh | 25% | 25% |
| Above Rs. 15 lakh | 30% | 30% |
As you can see, the new tax regime offers lower tax rates for most income ranges, except for the lowest and the highest ones. However, the new tax regime also has some drawbacks, such as:
- You cannot claim any deductions or exemptions, such as 80C, 80D, 80G, etc.
- You cannot claim any standard deduction, which is Rs. 50,000 for salaried individuals.
- You cannot claim any rebate under section 87A, which is Rs. 12,500 for income up to Rs. 5 lakh.
- You cannot claim any relief under section 89, which is for arrears or advance salary.
- You cannot set off any losses from house property or capital gains.
- You cannot opt for presumptive taxation under sections 44AD, 44ADA, or 44AE, which is for small businesses and professionals.
On the other hand, the old tax regime allows you to claim all these benefits, but at the cost of higher tax rates. Therefore, you have to weigh the pros and cons of both regimes and choose the one that suits your income and expenses better.
How to Choose Between the New Tax Regime and the Old Tax Regime?
The choice between the new tax regime and the old tax regime depends on various factors, such as your income level, sources of income, investments, expenses, deductions, exemptions, etc. There is no one-size-fits-all answer to this question, as different taxpayers may have different preferences and situations.
However, you can take these steps to choose which tax regime is more suitable for you:
- Step 1: Calculate your taxable income under both regimes, by adding all your income from various sources, such as salary, house property, capital gains, business or profession, etc.
- Step 2: Calculate your tax liability under both regimes, by applying the income tax slab rate for FY 2023-24, AY 2024-25, as shown in the table above. Don’t forget to add the surcharge and cess, if applicable.
- Step 3: Compare your tax liability under both regimes and see which one is lower. The lower tax liability means a better tax regime for you.
For example, let us assume that you are an individual with a salary income of Rs. 12 lakh, and you have invested Rs. 1.5 lakh in 80C, Rs. 25,000 in 80D, and Rs. 10,000 in 80G. You also have a standard deduction of Rs. 50,000, and a rebate of Rs. 12,500 under section 87A. Your taxable income and tax liability under both the regimes will be as follows:
| Particulars | New Tax Regime | Old Tax Regime |
|---|---|---|
| Salary income | Rs. 12 lakh | Rs. 12 lakh |
| Deductions and exemptions | Nil | Rs. 2.35 lakh |
| Taxable income | Rs. 12 lakh | Rs. 9.65 lakh |
| Tax liability | Rs. 1.79 lakh | Rs. 1.11 lakh |
| Rebate | Nil | Rs. 12,500 |
| Net tax liability | Rs. 1.79 lakh | Rs. 98,500 |
As you can see, the old tax regime is better for you, as it reduces your net tax liability by Rs. 80,500. This is because you have claimed a lot of deductions and exemptions, which are not available in the new tax regime.
However, if you have not made any investments or claimed any deductions or exemptions, then the new tax regime may be better for you, as it offers lower tax rates. Therefore, you have to do the calculations for yourself and see which tax regime gives you more savings.
Conclusion
The income tax slab rate for FY 2023-24, AY 2024-25, is an important factor that affects your tax planning and savings. You have to choose between the new tax regime and the old tax regime, based on your income and expenses. You have to compare the tax liability under both regimes and see which one is lower. The lower tax liability means a better tax regime for you.
We hope that this blog post has helped you understand the income tax slab rate for FY 2023-24, AY 2024-25, and how to choose the best tax regime for yourself!
