Income Tax Slabs in India
Last Updated : Feb. 1, 2020, 5:33 p.m.
What is the New Income Tax Slab for 2022-23?
The Income Tax Slab 2022-23 has not been announced yet as the budget 2022-23 will be introduced on the coming 1st Feb 2022. Finance Minister Nirmala Sitharaman will introduce any changes in the income tax slabs 2022-23 in the coming budget 2022-23. As of now, the latest income tax slab consists of no taxes for people with annual income of upto INR 2,50,000. For people having annual income between INR 2,50,000 – INR 5,00,000, the income tax slab rate stands at 5%. For people having annual income between INR 5,00,000 – INR 10,00,000, the income tax slab rate stands at 20%. For people having annual income above INR 10,00,000, the income tax slab rate stands at 30%. The Income Tax Slabs for women also remains the same as mentioned above. These salary income tax slabs are uniform to all individuals and are unchanged till now.
In 2014, the basic personal tax exemption level was last updated. It was in 2014 when Prime Minister Narendra Modi’s government presented its first budget, then-Finance Minister Arun Jaitley increased the basic income tax exemption limit from 2 lakh to 2.5 lakh. The exemption ceiling for older citizens has been enhanced from 2.5 lakh to 3 lakh. Since then, the basic exemption boundaries have remained unchanged.
On February 1, 2022, Nirmala Sitharaman will present her fourth Union Budget. According to certain observers, the finance minister may offer significant tax relief for taxpayers.
The basic income tax slab 2022-23 exemption level would be raised from 2.5 lakh to 3 lakh, as part of the anticipated relief. It is likely to be hiked to 3.5 lakh from the current 3 lakh for older folks.
The changes in the income tax slabs 2022-23 will be mentioned in the latest budget 2022-23 which will be announced soon in the coming week by the Finance Minister.
Income Tax Slabs for Previous Years
Finance Minister Nirmala Sitharaman has presented the much-awaited Union Budget 2021 in Parliament today. As far as income tax slabs 2021-22 are concerned, she has not proposed any changes in the same. So, slabs remain the same as were announced in last year’s budget.
Last year, she announced a slew of income tax concessions for individuals across different slabs. The slabs were restructured from INR 5 lakh onward. But these rate changes are OPTIONAL . So if you don’t go for optional rates, old rates will continue to apply. Check out the table below to understand the concept better.
| Old Income Tax Slabs ( Pre-Budget 2020) | Tax Rate | Optional New Income Tax Slabs | Tax Rate |
|---|---|---|---|
| Upto INR 2,50,000 | NIL | Upto INR 2,50,000 | NIL |
| Between INR 2,50,000 - INR 5,00,000 | 5% | Between INR 2,50,000 - INR 5,00,000 | 5% |
| Between INR 5,00,000 - INR 10,00,000 | 20% | Between INR 5,00,000 - INR 7,50,000 | 10% |
| Above INR 10,00,000 | 30% | Between INR 7,50,000 - INR 10,00,000 | 15% |
| Between INR 10,00,000 - INR 12,50,000 | 20% | ||
| Between INR 12,50,000 - INR 15,00,000 | 25% | ||
| Above INR 15,00,000 | 30% |
Few Notes to Keep in Mind
- The tax rate shown for Pre-Budget 2020 is for those having income above INR 5 lakh post eligible tax deductions. If the income after deductions remains INR 5 lakh and below, there won’t be any tax.
- The optional tax rate for individuals will be NIL for individuals earning upto INR 5 lakh a year. All those earning above INR 5 lakh will be taxed as per the slab shown in the table.
The reduced tax rates announced in Union Budget 2020 look exciting. But there’s a twist to it! What’s that?? Well, you need to sacrifice as many as 100 tax exemptions under various sections of the Income Tax Act, including 80C. The proposed slabs in the Union Budget 2020 are purely optional as told above. Now that sets the game delicately poised for taxpayers. To make an opinion on the changes made, check the calculations carefully and see which helps you save more.
Assume you earn INR 10 lakh in a year. How will the optional tax regime pan out for you compared to the conventional one? Let’s find out!
Tax Payable with Regular Income Tax Slabs
| Regular Income Tax Slabs 2021-22 | Tax |
|---|---|
| Annual Income | INR 10,00,000 |
| Standard Deduction | INR 50000 |
| Taxable Income | INR 9,50,000 |
| Upto INR 2,50,000 | NIL |
| Above INR 2,50,000 - INR 5,00,000 | 5% of (INR 5,00,000 - INR 2,50,000) = INR 12,500 |
| Above INR 5,00,000 - INR 9,50,000 | 20% of (INR 9,50,000 - INR 5,00,000) = INR 90,000 |
| Total Tax Payable Including 4% Education Cess | INR 1,02,500 + 4% of INR 1,02,500 = INR 1,06,600 |
Tax Payable with Optional New Income Tax Slabs
| Optional Income Tax Slabs | Tax |
|---|---|
| Annual Income | INR 10,00,000 |
| Standard Deduction | NIL |
| Taxable Income | INR 10,00,000 |
| Upto INR 2,50,000 | NIL |
| Above INR 2,50,000 - INR 5,00,000 | 5% of (INR 5,00,000 - INR 2,50,000) = INR 12,500 |
| Above INR 5,00,000 - INR 7,50,000 | 10% of (INR 7,50,000 - INR 5,00,000) = INR 25,000 |
| Above INR 7,50,000 - INR 10,00,000 | 15% of (INR 10,00,000 - INR 7,50,000) = INR 37,500 |
| Total Tax Payable Including 4% Education Cess | INR 75,000 + 4% of INR 75,000 = INR 78,000 |
Note – Standard deduction of INR 50,000 is assumed to be absent in the optional tax regime. As and when we get new information, we will update the calculation accordingly.
As per the calculations, optional tax slabs do show a savings of INR 28,600 (1,06,600-78,000) over the regular one. But that does not mean you should jump to the conclusion. We have not considered different tax deductions/exemptions that are given under different sections of the Income Tax Act. If we include that under the regular tax slabs, maybe you’ll pay less tax or even zero tax .
Note – While presenting the budget, the finance minister has announced that interest on employee contribution to PF over INR 2.5 lakh a year will now be taxable. Further, it has announced that pensioners aged above 75 years will be exempted from filing Income Tax Returns.