Income Tax Slabs and Rates in India for FY 2023-24 and FY 2024-25

Income Tax Slabs and Rates. Income tax is a direct tax levied by the government on the income earned by individuals, Hindu Undivided Families (HUFs), firms, and other entities during a financial year. It plays a crucial role in the economic development of the country and is an important source of revenue for the government.

In this article, we will talk about the income tax slabs and rates applicable for the financial years 2023-24 and 2024-25, covering both the old and new tax regimes.

Also Read-Understanding Income Tax in India: A Comprehensive Guide

Understanding the Income Tax System in India.

The income tax system in India follows a progressive tax structure, where the tax rate increases as the income increases. The Income Tax Act, 1961, governs the taxation of income in India and defines the various types of income, tax rates, deductions, and exemptions available to taxpayers.

Taxpayers have the option to choose between two tax regimes: the old tax regime and the new tax regime. The old tax regime offers a wide range of deductions and exemptions, while the new tax regime, introduced in Budget 2020, provides lower tax rates but with limited deductions and exemptions.

Income Tax Slabs and Rates for FY 2023-24 and FY 2024-25.

The Union Budget 2023 introduced significant changes to the income tax slabs and rates under the new tax regime. Taxpayers now have the option to choose between the old tax regime, which offers various deductions and exemptions, and the new tax regime, which provides lower tax rates but with limited deductions and exemptions.

New Tax Regime (Section 115BAC)

The new tax regime, introduced in the Union Budget 2020, aims to simplify the tax structure and reduce the tax burden on individuals. It became the default tax regime from April 1, 2023. Here are the income tax slabs and rates under the new tax regime for FY 2023-24 and FY 2024-25:

Old Tax Regime.

The old tax regime continues to be available for taxpayers who prefer to claim various deductions and exemptions. Here are the income tax slabs and rates under the old tax regime for FY 2023-24 and FY 2024-25:

Income Tax Slabs for Senior Citizens.

Senior citizens (aged 60 years and above but below 80 years) and super senior citizens (aged 80 years and above) enjoy higher exemption limits under both tax regimes. Here are the income tax slabs and rates for senior citizens under the new and old tax regimes for FY 2023-24 and FY 2024-25:

New Tax Regime for Senior Citizens.

Old Tax Regime for Senior Citizens.

Old Tax Regime for Super Senior Citizens.

Deductions and Exemptions.

The old tax regime offers various deductions and exemptions to taxpayers, allowing them to reduce their taxable income. Some of the commonly claimed deductions include:

Section 80C.

Section 80C allows a deduction of up to Rs. 1.5 lakh for investments made in specified instruments such as Public Provident Fund (PPF), Equity Linked Savings Scheme (ELSS), National Savings Certificate (NSC), life insurance premiums, and more.

Section 80D.

Section 80D provides a deduction for the payment of health insurance premiums for self, spouse, dependent children, and parents. The maximum deduction allowed is Rs. 25,000 for individuals below 60 years of age and Rs. 50,000 for senior citizens.

Section 80TTA and 80TTB.

Section 80TTA allows a deduction of up to Rs. 10,000 on the interest earned from savings accounts. For senior citizens, Section 80TTB provides a higher deduction limit of Rs. 50,000 on interest income from deposits.

Section 24.

Section 24 allows a deduction on the interest paid on a home loan. For self-occupied properties, the maximum deduction is limited to Rs. 2 lakh per annum. For let-out properties, the entire interest amount can be claimed as a deduction.It’s important to note that most of these deductions and exemptions are not available under the new tax regime.

Tax Rebate under Section 87A.

Under the old tax regime, individuals with a taxable income of up to Rs. 5 lakh are eligible for a tax rebate of up to Rs. 12,500 under Section 87A. This effectively means that individuals with income up to Rs. 5 lakh do not have to pay any tax.

In the new tax regime, the tax rebate under Section 87A has been increased to Rs. 25,000 for individuals with a taxable income of up to Rs. 7 lakh. This provides significant relief to taxpayers in the lower income brackets.

Standard Deduction.

The standard deduction, which was earlier available only under the old tax regime, has been extended to the new tax regime as well from FY 2023-24. Salaried individuals and pensioners can claim a standard deduction of Rs. 50,000, irrespective of the tax regime they opt for.

Surcharge and Cess.

In addition to the tax rates mentioned above, taxpayers are also required to pay a surcharge and cess on their income tax liability. The surcharge rates vary based on the total income, while the health and education cess is levied at 4% on the income tax and surcharge.

For FY 2023-24, the highest surcharge rate has been reduced from 37% to 25% for individuals with income above Rs. 5 crore. This reduction in surcharge provides relief to high-income earners.

Choosing the Right Tax Regime.

Taxpayers have the option to choose between the old and new tax regimes based on their income and investment patterns. The new tax regime may be beneficial for individuals with lower incomes and fewer investments, as they can take advantage of the lower tax rates.

However, for individuals with higher incomes and significant investments eligible for deductions, the old tax regime may still be more advantageous. It’s essential to evaluate both options and calculate the tax liability under each regime to make an informed decision.

Income Tax Slabs and Rates for FY 2024-25.

As per the Interim Budget 2024, there have been no changes announced in the income tax slabs and rates for the financial year 2024-25. The tax slabs and rates applicable for FY 2023-24 are expected to continue for FY 2024-25 as well, unless any amendments are made in the full budget.

Tax Planning Strategies.

Effective tax planning involves utilizing the various deductions, exemptions, and tax-saving investments available under the Income Tax Act to minimize the tax liability. Some tax planning strategies include:

• Investing in tax-saving instruments under Section 80C, such as PPF, ELSS, NSC, etc.
• Claiming deductions for health insurance premiums under Section 80D.
• Availing the benefits of home loan interest deduction under Section 24.
• Investing in the National Pension System (NPS) for additional tax benefits under Section 80CCD.
• Making donations to eligible charitable organizations and claiming deductions under Section 80G.

It’s advisable to consult with a tax expert or financial advisor to devise a personalized tax planning strategy based on individual income, investments, and financial goals.

Recent Updates and Amendments.

Budget 2023 Announcements.

In the Union Budget 2023, several key changes were introduced to the income tax system:

• The new tax regime was made the default option, with taxpayers having the choice to opt for the old tax regime.
• The tax rebate under Section 87A was increased to Rs. 25,000 for individuals with income up to Rs. 7 lakh under the new tax regime.
• The highest surcharge rate was reduced from 37% to 25% for individuals with income above Rs. 5 crore.
• The standard deduction of Rs. 50,000 was extended to the new tax regime.

These amendments aimed to simplify the tax structure, provide relief to taxpayers, and encourage the adoption of the new tax regime.

Interim Budget 2024.

The Interim Budget 2024, presented in February 2024, did not propose any changes to the income tax slabs and rates for FY 2024-25. The government maintained the existing tax structure, providing stability and continuity for taxpayers.However, it’s important to note that the full budget for FY 2024-25, which will be presented in July 2024, may introduce further amendments or revisions to the income tax system.

Summarizing.

Understanding the income tax slabs and rates is crucial for taxpayers to plan their finances effectively and comply with tax laws. The availability of two tax regimes – the old and the new – provides flexibility to taxpayers to choose the option that best suits their financial situation.

By staying updated with the latest income tax slabs, rates, deductions, and exemptions, individuals can make informed decisions about their investments and tax planning strategies. Filing income tax returns accurately and within the due dates is a legal obligation and helps maintain transparency with the tax authorities.

It’s recommended to seek professional guidance from a tax expert or chartered accountant for complex tax matters and to ensure proper compliance with the Income Tax Act. With the right knowledge and planning, taxpayers can navigate the income tax system efficiently and fulfill their tax obligations responsibly.

As the government continues to introduce reforms and amendments to the income tax system, it’s essential for taxpayers to stay informed about the changes and adapt their financial strategies accordingly. By doing so, individuals can optimize their tax savings, maximize their take-home income, and contribute to the nation’s economic growth.

C.K. Gupta

Hello, I am C.K. Gupta Founder of Taxgst.in, a seasoned finance professional with a Master of Commerce degree and over 20 years of experience in accounting and finance. My extensive career has been dedicated to mastering the intricacies of financial management, tax consultancy, and strategic planning. Throughout my professional journey, I have honed my skills in financial analysis, tax planning, and compliance, ensuring that all practices adhere to the latest financial regulations. My expertise also extends to auditing, where I focus on maintaining accuracy and integrity in financial reporting. I am passionate about using my knowledge to provide insightful and reliable financial advice, helping businesses optimize their financial strategies and achieve their economic goals. At Taxgst.in, I aim to share valuable insights that assist our readers in navigating the complex world of taxes and finance with ease.