New Tax Regime Under Income Tax FY (2022-23) & Old Tax Regime.
WHAT IS AN INCOME TAX?
Income Tax.
Income tax is a direct tax the central government charges on the income earned during the previous financial year by individuals and businesses. It is calculated based on the tax slab rate defined by the Income Tax Department.
Income tax is levied on the income earned by all the individuals, HUF, partnership firms, LLPs, and Corporates as per the Income-tax Act of India. In the case of individuals, tax is levied as per the slab system if their income is above the minimum threshold limit (known as the basic exemption limit ).
1. What is the income tax slab?
Indian Income-tax levies tax on individual taxpayers based on a slab system. A slab system means different tax rates are prescribed for different ranges of income. It means the tax rates keep increasing with an increase in the income of the taxpayer. This type of taxation enables progressive and fair tax systems in the country. Such income tax slabs tend to change every budget.
These slab rates are different for different categories of taxpayers. Income tax has classified three categories of “individual “taxpayers such as:
- Individuals (aged less than 60 years) including residents and non-residents
- Resident Senior citizens (60 to 80 years of age)
- Resident Super senior citizens (aged more than 80 years)
New Income Tax regime.
A. Income tax slab rate FY 2021-22 (AY 2022-23) – Applicable for New Tax regime.
| Income Tax Slab | New Regime Income Tax Slab Rates FY 2021-22 (Applicable for All Individuals & HUF) |
| Rs 0.0 – Rs 2.5 lakh | NIL |
| Rs 2.5 lakh – Rs 3.00 lakh | 5% (tax rebate u/s 87a is available) |
| Rs 3.00 lakh – Rs 5.00 lakh | 5% (tax rebate u/s 87a is available) |
| Rs 5.00 lakh- Rs 7.5 lakh | 10% |
| Rs 7.5 lakh – Rs 10.00 lakh | 15% |
| Rs 10.00 lakhs – Rs 12.50 lakh | 20% |
| Rs 12.5 lakhs – Rs 15.00 lakh | 25% |
| > Rs 15 lakh | 30% |
EXEMPTION AND DEDUCTION ARE ALLOWED.
- Daily allowance.
- Transport allowance for specially-abled people.
- Conveyance allowance for expenditure incurred for work traveling.
- Investment in Notified Pension Scheme under section 80CCD(2).
- Section 80JJA deduction.
EXEMPTION AND DEDUCTION ARE NOT ALLOWED.
- Standard deduction.
- Interest on Housing Loan (Section 24).
- Leave Travel Allowance (LTA).
- House Rent Allowance (HRA).
- Major Deduction under Chapter VI-A.
Difference of tax slab rates between New tax regime vs Old Tax regime.
NOTE:
- Please note that the tax rates in the New tax regime are the same for all categories of Individuals, i.e Individuals & HUF upto 60 years of age, Senior citizens above 60 years upto 80 years, and Super senior citizens above 80 years. Hence no increased basic exemption limit benefit will be available to senior and super senior citizens in the New Tax regime.
- Individuals with net taxable income less than or equal to Rs 5 lakh will be eligible for tax rebate u/s 87A i.e tax liability will be nil for such individuals in both – New and old/existing tax regimes.
- The basic exemption limit for NRIs is Rs 2.5 Lakh irrespective of age.
- Additional Health and Education cess at the rate of 4 % will be added to the income tax liability in all cases. (increased from 3% since FY 18-19)
- Surcharge applicable as per tax rates below in all categories mentioned above:
- 10% of Income-tax if total income > Rs.50 lakh
- 15% of Income tax if total income > Rs.1 crore
- 25% of Income tax if total income > Rs.2 crore
- 37% of Income tax if total income > Rs.5 crore
Income tax slab rate for Old Tax regime – FY 2020-21 (AY 2021-22)
1). Age Group: Below 60 years & HUF.
| Income Tax Slab | Individuals Below The Age Of 60 Years – Income Tax Slabs |
|---|---|
| Up to Rs 2.5 lakh | NIL |
| Rs. 2.5 lakh -Rs. 5 lakh | 5% |
| Rs 5.00 lakh – Rs 10 lakh | 20% |
| > Rs 10.00 lakh | 30% |
NOTE:
- The income tax exemption limit is up to Rs 2,50,000 for Individuals, HUF below 60 years, and NRIs.
- An additional 4% Health & education cess will be applicable on the tax amount calculated as above.
- Surcharge:
- 10% of income tax, where total income exceeds Rs.50 lakh up to Rs.1 crore.
- 15% of income tax, where the total income exceeds Rs.1 crore.
Income tax slab for individuals aged above 60 years to 80 years
2). Age Group: Above 60 years to 80 years
| Income Tax Slab | Tax Slabs for Senior Citizens (Aged 60 Years But Less Than 80 Years) |
|---|---|
| Rs 0 – Rs. 3.00 lakh | NIL |
| Rs 3.00 lakh – Rs 5.00 lakh | 5% |
| Rs 5.00 lakh – Rs 10 lakh | 20% |
| > Rs 10 lakh | 30% |
NOTE:
- The income tax exemption limit is up to Rs. 3,00,000 for senior citizens aged above 60 years but less than 80 years.
- An additional 4% Health & education cess will be applicable on the tax amount calculated above
- Surcharge applicability::
- 10% of income tax, where total income exceeds Rs.50 lakh up to Rs.1 crore.
- 15% of income tax, where the total income exceeds Rs.1 crore.
Income tax slab for Individual aged more than 80 years
2). Age Group: More than 80 years.
| Income Tax Slab | Income Tax Slab for Super Senior Citizens (Aged 80 Years And Above) |
|---|---|
| Rs 0.00 – Rs 5.00 lakh* | No tax |
| Rs 5.00 lakh – Rs 10 lakh | 20% |
| > Rs 10 lakh | 30% |
NOTE:
- The income tax exemption limit is up to Rs. 5,00,000 for super senior citizens aged above 80 years.
- An additional 4% Health & education cess will be applicable on the tax amount calculated as above.
- Surcharge applicability::
- 10% of income tax, where total income exceeds Rs.50 lakh up to Rs.1 crore.
- 15% of income tax, where the total income exceeds Rs.1 crore.
Income tax slab rates for FY 2021-22 (AY 2022-23) – New tax regime & Old Tax regime
| Income Tax Slab | Existing Regime Slab Rates for FY 20-21 (AY 21-22) | New Regime Slab Rates for FY 20-21 (AY 21-22) | ||
|---|---|---|---|---|
| Resident Individuals & HUF < 60 years of age & NRIs | Resident Individuals & HUF > 60 to < 80 years | Resident Individuals & HUF > 80 years | Applicable for All Individuals & HUF | |
| Rs 0.0 – Rs 2.5 lakh | NIL | NIL | NIL | NIL |
| Rs 2.5 – Rs 3.00 lakh | 5% (tax rebate u/s 87a is available) | NIL | NIL | 5% (tax rebate u/s 87a is available) |
| Rs 3.00- Rs 5.00 lakh | 5% (tax rebate u/s 87a is available) | NIL | ||
| Rs 5.00 – Rs 7.5 lakh | 20% | 20% | 20% | 10% |
| Rs 7.5 – Rs 10.00 lakh | 20% | 20% | 20% | 15% |
| Rs 10.00 – Rs 12.50 lakh | 30% | 30% | 30% | 20% |
| Rs 12.5 – Rs 15.00 lakh | 30% | 30% | 30% | 25% |
| > Rs 15 lakh | 30% | 30% | 30% | 30% |
Conditions for opting New Tax regime.
The taxpayer opting for concessional rates in the New Tax regime will have to forgo certain exemptions and deductions available in the existing old tax regime. In all there are 70 deductions & exemptions that are not allowed, out of which the most commonly used are listed below:
List of common Exemptions and deductions “ not allowed” under the New Tax rate regime.
- Leave Travel Allowance (LTA)
- House Rent Allowance (HRA)
- Conveyance allowance
- Relocation allowance
- Children education allowance
- Interest on housing loan (Section 24)
- Other special allowances [Section 10(14)]
- Professional tax
- Daily expenses in the course of employment
- Deduction under Chapter VI-A deduction (80C,80D, 80E, and so on) (Except Section 80CCD(2))
List of deductions “allowed” under new Tax rate regime
- Transport allowance for specially-abled people.
- Conveyance allowance for expenditure incurred for traveling to work.
- Investment in Notified Pension Scheme under section 80CCD(2).
- Deduction for employment of new employees under section 80JJAA.
- Depreciation u/s 32 of the Income-tax act except for additional depreciation.
- Any allowance for traveling for employment or on transfer.
Time of Selection of an option of old vs new regime?
| Nature of Income | Time of Selection of an option of old vs new regime |
|---|---|
| Income from Salary or any other head of income attracting TDS | Employees can choose from the new tax regime and intimate their employer at the beginning of the financial year. Employees can change the option of selecting the tax regime every year However if a new tax slab regime opts at the beginning of the year, it cannot be changed anytime during the year for TDpurposesse, however, the option can be changed at the time of filing of Income-tax return. |
| Income from Business & Profession | In the case of Business or professional income, the option to choose between the tax regimes is available only once for a particular business. |
New Tax regime Slab rates for domestic companies – FY 2021-22.
| Particulars | Existing / Old regime Tax rates | New Regime Tax rates |
|---|---|---|
| The company opts for section 115BAB (not covered in sections 115BA and 115BAA) & is registered on or after October 1, 2019, and has commenced manufacturing on or before 31st March 2023. | – | 15% |
| The company opts for Section 115BAA, wherein the total income of a company has been calculated without claiming specified deductions, incentives, exemptions, and additional depreciation | – | 22% |
| The company opts for section 115BA registered on or after March 1, 2016, and engaged in the manufacture of any article or thing and does not claim the deduction as specified in the section clause. | – | 25% |
| Turnover or gross receipt of the company is less than Rs. 400 crore in the previous year 2018-19 | 25% | 25% |
| Any other domestic company | 30% | 30% |
The new income tax regime is beneficial for people who make low investments. Therefore, if you invest less in tax-saving schemes, go for the new regime.
Thank You
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