The government of India levies tax on income earned by every individual or business – this is called Income Tax. Revised income tax rates are announced every year in the Union Budget by the Finance Minister. If an individual’s income is above a specific minimum limit, he/she must pay income tax to the government.

2023 Union Budget Income Tax Highlights

  • Minimum taxable income is now Rs 3,00,000 – increased from the previous Rs 2,50,000 minimum amount
  • The new tax regime is now the default option for taxpayers. The old regime will still be available but must be chosen by the taxpayer specially.
  • The highest surcharge levied on personal income tax, which was 37% is now reduced to 25%.
  • Leave encashment limit of non-government salaried employees retirement has increased to Rs 25 lakh from the previous limit of Rs 3 lakh.

What is Income Tax Slab?

Income tax is a tax collected by the government on the income individuals earn above a certain amount. 

Income tax in India is collected on the basis of the income tax slab system. 

  • Different rates of income tax is levied on different amounts of income earned.
  • Only income above a certain amount is taxed. 

For example, a person earning Rs 11 lakhs as income would fall under the Rs 9 lakhs to Rs 12 lakhs slab. The rate applicable to this income tax slab would be 15% on the amount exceeding Rs 9 lakhs. 

To calculate this:

11,00,000 (-) 9,00,000 = 2,00,000

Therefore, this person would pay Rs 45,000 plus 15% of 2,00,000 which is 30,000 – bringing the total tax payable to Rs 75,000.

Here are the revised income tax rates, with the revised slabs for the financial year 2023-24.

Budget 2023 Updated & New Income Tax Slabs

Income  Tax rate
Up to Rs. 3,00,000 0%
Rs. 300,001 – Rs. 6,00,000 5% on income exceeding Rs 3,00,000 
Rs. 6,00,001 – Rs. 900,000 Rs 15,000 + 10% on income exceeding Rs 6,00,000
Rs. 9,00,001 – Rs. 12,00,000 Rs 45,000 + 15% on income exceeding Rs 9,00,000
Rs. 12,00,001 – Rs. 1500,000 Rs 90,000 + 20% on income exceeding Rs 12,00,000
Above Rs. 15,00,000 Rs 150,000 + 30% on income exceeding Rs 15,00,000

 

For individuals who earn income below Rs 3,00,000 no tax is levied. Previously, this minimum taxable income was Rs 2,50,000. Anybody earning income above Rs 3,00,000 will have to pay 5% tax on every rupee that is more than Rs 3,00,000.

Income Tax Slab for Senior Citizens

(Individuals between 60 and 80 Years of Age)

Income Earned Tax Rates
< Rs 3,00,000 Nil
Rs 3,00,001 – Rs 5,00,000 5%
Rs 5,00,001 – Rs 10,00,000 20%
> Rs 10,00,001 30%

Note: An additional 4% health and education cess is applicable on the tax amount 

Income Tax Slab for Super Senior Citizens

(Individuals Above 80 Years of Age)

Income Earned Tax Rates
< Rs 5,00,000 Nil
Rs 5,00,001 – Rs 10,00,000 20%
> Rs 10,00,001 30%

Note: An additional 4% health and education cess is applicable on the tax amount

Income Tax Rebate Budget 2023

Income Tax Rebate U/S 87A Existing Proposed
Total income (upto) 5,00,000 7,00,000
Tax rebate (maximum) 12,500 25,000

 

Income tax rebate is the refund given to a person who paid more tax than liable. Any excess money is refunded at the end of the year along with interest.

With the 2023 Union Budget, anybody earning an income less than Rs 7 lakh can avail income tax rebate.

Previously, the minimum income that a person had to earn in order to get this rebate was 5 lakhs. 

The previous maximum tax rebate of income tax was Rs 12,500. With the Budget 2023, the maximum tax rebate of income tax is Rs 25,000. 

Surcharge for Income Tax FY 2023-24

Income Earned Surcharge Rate
Rs 50 lakhs to Rs 1 crore 10%
Rs 1 crore to Rs 2 crores 15%
Rs 2 crores to Rs 5 crores 25%
More than Rs 5 crores 37%

Note: 37% surcharge  does not apply to individuals, HUF, BOI, AJP and AOP under new regime

Differences Between New Tax Regime and Old Tax Regime Budget 2023-24

In the Union Budget 2023, it was announced that the default option would no longer be the old tax regime. From this year onwards, the default option will be the new tax regime. 

Let’s look at the differences between the old and new regimes. 

Criteria Old Tax Regime New Tax Regime
Tax Rates Tax rates were higher under the old tax regime. For example, the highest tax rate was 30% Under the new tax regime, the highest tax rate is 22%. 
Tax Exemptions There were more exemptions under the old tax regime.  Under the new tax regime, only limited deductions are available. 
Tax Structure The old tax regime had a complicated tax structure.  Under the new tax regime, the tax structure is simpler and more streamlined. 
Taxability of Investments Investments was taxed at higher rates under the old tax regime. Under the new tax regime, investments are taxed at lower rates. For example, investments in equity-oriented mutual funds are now only taxed at 10%.

 

Old Tax Regime vs New Tax Regime: Which is Better?

The new tax regime of India is beneficial for taxpayers because it offers a more simplified and reduced tax rate structure. It also offers other tax benefits like exemptions for certain incomes and deductions for certain expenses.

The new regime also includes a number of measures to reduce the compliance burden, such as allowing taxpayers to file their taxes electronically and reducing the number of documents that need to be submitted in order to file returns. 

This new regime is more beneficial to taxpayers earning lower incomes since it offers lower income tax slabs and more benefits to those without investments. The old regime is beneficial to those earning high incomes who opt for investing in high tax saving schemes.

However, the old tax regime may be better for some taxpayers, depending on specific circumstances. Ultimately, it is best to consult with a tax professional to decide which regime is best for each individual situation.

Deductions & Exemptions – New Tax Regime vs Old Tax Regime

With the new Income Tax Regime there have been many changes to the deductions and exemptions available to people paying tax on their income. Here is a comparison between the old tax regime and the new regime of the deductions and exemptions available.

Particulars Old Tax Regime New Tax Regime
(Until 31st March 2023)
New Tax Regime (From 1st April 2023) 
Minimum income for rebate eligibility Rs 5,00,000 Rs 5,00,000 Rs 7,00,000
Standard Deduction Rs 50,000 Rs 50,000
Effective Tax-Free Salary income Rs 5,50,000 Rs 5,00,000 Rs 7,50,000
Maximum rebate amount Rs 12,500 Rs 12,500 Rs 25,000
HRA Exemption
Leave Travel Allowance 
Other Allowances 
Standard Deduction
Entertainment Allowance Deduction & Professional Tax
Perquisites for official purposes
Interest on home loan u/s 24b on self-occupied or vacant property
Interest on home loan on let out property 
Deduction u/s 80C*
Employee contribution to EPS
Employer’s contribution to EPS
Medical Insurance Premium – 80D
Disabled individual – 80U
Interest on education loan – 80E
Interest on electric vehicle loan – 80EEB
Donation to political party/trust – 80G
Savings Bank Interest u/s 80TTA and 80TTB
Other Chapter VI-A deductions
All contributions to Agniveer Corpus Fund – 80CCH Did not exist
Deduction on family pension income
Gifts up to Rs 5,000
Exemption on voluntary retirement 10 (10C)
Exemption on gratuity u/s 10 (10)
Exemption on Leave encashment u/s 10 (10AA)
Daily Allowance
Transport Allowance for disabled person
Conveyance Allowance

*EPF/LIC/ELSS/PPF/FD/Children’s tuition fee 

 

FAQs

What is the new income tax slab?

Up to Rs. 3,00,000 = 0%
Rs. 3,00,000 - Rs. 6,00,000 = 5% on income exceeding Rs 3,00,000 Rs. 6,00,000 - Rs. 900,000 = Rs 15,000 + 10% on income exceeding Rs 6,00,000
Rs. 9,00,000 - Rs. 12,00,000 = Rs 45,000 + 15% on income exceeding Rs 9,00,000
Rs. 12,00,000 - Rs. 1500,000 = Rs 90,000 + 20% on income exceeding Rs 12,00,000
Above Rs. 15,00,000 = Rs 150,000 + 30% on income exceeding Rs 15,00,000

What is the limit of tax free income?

Until now, the limit of tax free income was 5 lakhs. Only income above 5 lakhs was taxed according to the income rates given. With the 2023 Union Budget, this minimum taxable income was changed to 7 lakhs. Only those who earn income above Rs 7,00,000 will be taxed.

How is tax calculated on salary?

Tax on salary is calculated taking into account many factors like age, amount of income, investments and others. After deducting investments and TDS, the final amount is liable to be paid as tax on salary, or income tax.

What is the income tax slab for FY 2022-23?

Income tax slab for FY 2022-23 is given below.
Up to Rs. 3,00,000 = 0%
Rs. 3,00,000 - Rs. 6,00,000 = 5% on income exceeding Rs 3,00,000 Rs. 6,00,000 - Rs. 900,000 = Rs 15,000 + 10% on income exceeding Rs 6,00,000
Rs. 9,00,000 - Rs. 12,00,000 = Rs 45,000 + 15% on income exceeding Rs 9,00,000
Rs. 12,00,000 - Rs. 1500,000 = Rs 90,000 + 20% on income exceeding Rs 12,00,000
Above Rs. 15,00,000 = Rs 150,000 + 30% on income exceeding Rs 15,00,000

How can I reduce my income tax?

You can reduce your income tax liability by investing in products that come under Section 80C, like PPF, PDF, and ULIP. You can also claim deductions on House Rent Allowance. Another good way to save tax is by donating to charity, since charity donations are not taxed.

Which tax slab is best, old or new?

The new tax regime of India is beneficial for taxpayers because it offers a more simplified and reduced tax rate structure. However, the old tax regime may be better for some taxpayers. Ultimately, it is best to consult with a tax professional to decide which regime is best for each individual situation.

What is basic exemption limit?

The maximum amount of income which is not chargeable to Income-tax in case of Individual, HUF/ AOP/ BOI/ Artificial Juridical Person as per the Union Budget 2023 is Rs 2,50,000.

Author

Raghavi likes to think that because she writes for a living, she'd be good at writing a short bio for herself. But she isn't. She is good at binging K-drama, though.

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