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As the fiscal year 2023-2024 approaches, people and organizations in India must stay up to date on the newest changes in income tax brackets. The income tax system is a substantial source of revenue for the government and has a considerable impact on taxpayers’ financial planning.
The most recent modifications to the income tax slab for the fiscal year 2023-2024 will affect the amount of tax that individuals and corporations must pay. It is critical to stay up to date on these developments to properly prepare and file your taxes. Being aware of these changes also aids in better financial planning because it allows you to adapt your spending and saving habits accordingly.
Whether you are a salaried employee, self-employed, or manage a business, staying up to date on the latest changes to income tax brackets is critical for making informed financial and tax decisions. In this post, we will look at the latest income tax slab for the fiscal year 2023-2024 in India and what they signify for taxpayers.
What is an Income Tax Slab?
For those new to income tax filing, let us explain what an income tax slab is and how to determine which slab you fall under. The income tax slab refers to the amount of tax that you owe to the income tax department based on your income. You are required to pay taxes based on the slab that your income falls under.
This system is designed to ensure that individuals pay their fair share of taxes based on their income. Higher earners pay higher taxes, while those with lower incomes pay lower taxes. This structure creates a fair and equitable system for the citizens of the country.
Federal Tax Brackets For 2023-2024
Based on the latest financial budget for 2023 there are no changes in the tax slab for the old regime. However, the new regime of the financial bill 2023 has included a deduction of Rs.55,000 for employers. People can avail of tax benefits from both regimes. Let us discuss the tax slabs in detail for each tax slab –
Old Tax Slab Regime –
1. For Employers below 60 years-
| Income Tax Slabs | Tax Deduction |
| Upto Rs.2.5 Lakhs | — |
| From Rs. 2.5 Lakhs – Rs. 5 Lakhs | 5% of Total Income above Rs. 2.5 Lakhs + 4% cess |
| From Rs. 5 Lakhs – Rs. 10 Lakhs | 20 % of Total Income above Rs.5 lakhs +4 % cess |
| From Rs. 10 Lakhs | 30% of Total Income above Rs.10 lakhs + Rs.1,12,500 + 4% cess |
2. For Employers above 60- 80 years, Senior and Super Senior Citizens
| Income Tax Slabs | Tax Deduction |
| Up to Rs.3 lakh | – |
| From Rs.3.00 lakh – Rs.5.00 lakh | 5% of Total Income above Rs. 3 Lakhs + 4% cess |
| From Rs.5.00 lakh – Rs.10 lakh | 20 % of Total Income above Rs.5 lakhs +4% cess |
| From Rs.10 lakh onwards | 30% of Total Income above Rs.10 lakhs + Rs.1,12,500 + 4% cess |
New Tax Slab Regime
For employers below 60 years
| Income Tax Slabs | Tax Deduction |
| Upto Rs.3 Lakhs | — |
| From Rs. 3 Lakhs – Rs. 6 Lakhs | 5% of Total Income |
| From Rs. 6 Lakhs – Rs. 9 Lakhs | 10 % of Total Income |
| From Rs. 9 Lakhs – Rs. 12 Lakhs | 15 % of Total Income |
| From Rs.12 lakh – Rs.15 lakh | 20% of Total Income |
| From Rs. 15 lakhs onwards | 30% of Total Income |
PS: The Latest Income Tax Slab rates are optional to comply with.
When opting for the new tax slab for your tax filing, there are several things to keep in mind:
- The option can only be adopted for the current financial year or the previous year if you are an individual or a member of a Hindu Undivided Family without any business income.
- Once you choose the new tax regime, you cannot switch back to the old regime during the same financial year. However, you can change back to the old regime in the following financial year.
- If you earn through a profession or business, you will not be able to switch between the regimes once you have chosen the new tax regime.
Let us understand the total tax payable for any salaried employee based on the new regime with a salary of around Rs. 12 lakhs for instance
| Total Income | Rs. 12 lakhs |
| Deductions | |
| HRA, Travel & Insurance | |
| Tax Slab upto 3 lakhs | — |
| From Rs. 3 lakhs – Rs. 6 lakhs | Rs. 15,000 |
| From Rs. 6 lakhs – Rs. 9 lakhs | Rs. 30,000 |
| From 9 lakhs – Rs. 12 lakhs | Rs. 45,000 |
| Total Payable | Rs. 90,000 |
Surcharge Rates on Income Tax
Based on the Earlier Assessment of the Year 2022- 2023
| Income Slab | Surcharge Rate |
| Rs 50. Lakhs – Rs. 1 Crore | 10% |
| Rs. 1 Crore – Rs. 2 Crore | 15% |
| Rs. 2 Crore – Rs. 5 Crore | 25% |
| Rs. 5 Crore – Rs. 10 Crore | 37% |
| Above Rs. 10 Crore | 37% |
The New Assessment Surcharge Rate for the Financial Year 2023-2024
| Income Slab | Surcharge Rate |
| Below Rs. 50 Lakhs | – |
| Rs 50. Lakhs – Rs. 1 Crore | 10% |
| Rs. 1 Crore – Rs. 2 Crore | 15% |
| Rs. 2 Crore – Rs. 5 Crore | 25% |
| Above Rs. 5 Crore | 25% |
How to Calculate Your Tax Liability Using the Latest Brackets?
Calculating your tax liability can be a complex process, especially with the constantly changing tax laws. Here’s a general overview of how you can calculate your tax liability using the latest tax brackets:
- Determine your taxable income: This includes all your income sources such as salary, business income, rental income, capital gains, etc.
- Determine your filing status: This includes single, married filing jointly, married filing separately, or head of household.
- Use the tax brackets and rates applicable to your filing status to calculate your federal tax liability: The federal tax brackets and rates change every year and vary based on your filing status. You can find the latest tax brackets and rates on the IRS website.
- Determine any adjustments to income: Certain expenses can be subtracted from your taxable income to reduce your tax liability. This includes expenses such as student loan interest, alimony payments, and self-employment taxes.
- Determine any tax credits: Tax credits directly reduce the amount of tax you owe. Some common tax credits include the Child Tax Credit, the Earned Income Tax Credit, and the American Opportunity Tax Credit.
- Calculate your total tax liability: Add up the federal income tax calculated using the tax brackets, any state and local taxes you may owe, and any self-employment taxes.
- Calculate the Goods & Services Tax (GST) Payment if applicable to avoid any type of confusion later.
Subtract any tax withheld from your paychecks and any estimated tax payments you have made throughout the year from your total tax liability. If the amount you owe is more than the amount withheld, you may need to make a payment when you file your tax return. If the amount withheld is more than the amount you owe, you will receive a refund.
It’s important to note that this is a basic overview and your tax situation may be more complex. I would recommend consulting a tax professional if you have any questions or need assistance in calculating your tax liability.
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To Conclude
In conclusion, the 2023-2024 financial year has brought forth updates to the income tax brackets. Taxpayers have the option to choose between the old regime or the new regime, with specific eligibility criteria for switching between the two.
It’s important to consider and evaluate various factors while determining tax liability, such as taxable income, filing status, adjustments to income, and tax credits. Understanding the latest tax brackets and guidelines can help ensure that you accurately calculate your tax liability and stay compliant with the tax laws.
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Frequently Asked Questions (FAQs)
- Do I have to file income tax returns if I am earning Rs. 3 Lakhs per annum?
No, you don’t have to file an ITR if you are earning Rs.3 Lakhs or less according to the new regime financial year 2023.
- Will the Family Pension also be taxed under salary income taxation?
No, the family pension is not taxed under the salary income taxation instead is considered as the ‘income from other sources’.
- Can I switch my income tax regime from the new to the old regime?
Yes, you can switch the income tax regime from the new to the old regime. But this is only possible during the beginning of the new financial year and cannot be done any other time during the year.
- Who formulates or changes the income tax regimes in India?
The Financial Minister of India proposes changes in the income tax regimes in India.
