Tax Slabs for AY 2022-23
Every person who receives a salary is required to pay income tax according to the applicable tax slab structure. According to the Income Tax Act of India, income tax slab is levied on the income received by all individuals, HUFs, partnership firms, corporations, and LLPs. The income tax slab displays the various tax rates that are allowed for various income brackets.
The income tax slab has not changed as of the current budget for 2022. The old system, which offered a variety of exemptions and deductions, and the new system, which gives reduced tax slab rates to those prepared to give up exemptions and deductions, are both available to taxpayers. Let’s look at the new income tax slab rates for the fiscal years 2021–2022 and 2022–2023
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What is income tax slab?
Individual taxpayers will be required to pay income tax according to the tax slab system to which they are assigned. An individual may fall under a different tax slab depending on their income. As a result, people with greater incomes will have to pay more tax. To keep the nation’s tax system equitable, the slab system was implemented. Every time a budget announcement is made, the tax slabs frequently vary.
See here for tax sabs of new regime and old regime-
| Income tax rate slabs (Rs) | Old Regime | New Regime | Surcharge |
| Up to 2.50 lakh | nil | nil | Nil |
| 2.50 lakh to 5.00 lakh | 5% | 5% | Nil |
| 5.00 lakh to 7.50 lakh | 20% | 10% | Nil |
| 7.50 lakh to 10.00 lakh | 20% | 15% | Nil |
| 10.00 lakh to 12.50 lakh | 30% | 20% | Nil |
| 12.50 lakh to 15.00 lakh | 30% | 25% | Nil |
| 15.00 lakh to 50.00 lakh | 30% | 30% | Nil |
| 50.00 lakh to 1.00 Cr | 30% | 30% | 10% |
| 1.00 Cr to 2.00 Cr | 30% | 30% | 15% |
| 2.00 Cr to 5.00 Cr | 30% | 30% | 25% |
| 5.00 Cr & above | 30% | 30% | 37% |
Notes:
- All categories of people, i.e., individuals and HUF up to the age of 60, senior citizens between the ages of 60 and 80, and super senior citizens over the age of 80, are subject to the same tax rates under the new tax regime. Senior and super senior citizens will not be eligible for the enhanced basic exemption limit benefit under the new tax system.
- People who qualify for tax exemption under Section 87A of the IT Act must have net taxable income that is less than or equal to Rs. 5 lakh. In both the new and the old tax regimes, such individuals will have no tax responsibility.
- The basic exemption ceiling for NRIs is Rs. 2.5 lakh, regardless of age.
- The additional 4% health and education levy will always be added to the income tax obligation.
Before choosing the new tax slab, you should bear the following in mind:
- If you as an individual or as a member of a Hindu Undivided Family (HUF) do not have any business income, the option may be exercised on or before for each prior year.
- Once a taxpayer selects the next tax regime as an option, they are unable to change it later in the year. If you change your mind and choose to return to the previous tax system, you can choose it again during the current fiscal year.
Partnership Firm Income Tax Slabs for FY 2021–22 and AY 2022–23
For the AYs 2021–22 and 2022–23, partnership firms, including LLPs (Limited liability partnerships), are subject to a 30% tax rate. LLPs and partnership firms do not receive a tax slab treatment for their income tax calculations, in contrast to individual and HUF taxpayers.
If the partnership firm’s income exceeds Rs. 1 Crore, a 12% surcharge will also be added to the amount of tax due. If the surcharge amount exceeds the income exceeding Rs. 1 Crore, there is a marginal relief.
The tax slab amount plus surcharge is additionally subject to a 4% health and education cess.
Old Tax Regime Vs New Tax Regime, Which is Better?
For middle-class taxpayers who have taxable income up to Rs. 15 lakh, the new tax system may be advantageous. For those with high incomes, the previous administration is preferable.
For taxpayers who make little investments, the new tax system’s seven lower income tax slabs are advantageous. The new tax slab rates are advantageous to everyone paying taxes without claiming any tax breaks. For instance, a taxpayer with investments worth less than Rs. 1.9 lakh who has a total income of up to Rs. 12 lakh before deductions will have a higher tax due under the previous tax system. People who invest less in tax-saving strategies should therefore choose the new system.
Contrarily, taxpayers who have a substantial investment portfolio and have made investments in tax-saving strategies like mediclaim, life insurance, ULIP, paying for children’s tuition, making EMI payments on student loans, buying a home with a home loan, etc. should choose the previous tax system because it offers a higher tax deduction and lower tax outlay.
Overall, it is crucial to compare and evaluate the two regimes in order to select the most advantageous one for one’s needs and circumstances.
Let’s use the old and new tax laws for a taxpayer with an income of Rs. 10 lakh as an example.
Mr. Vikas makes Rs. 10 lakh in pay annually. Under Section 80C, he has invested a total of Rs. 1.7 lakh in ELSS, LIC premium, PF, and principal payments on home loans. In addition to this, he spends Rs. 20,000 on medical insurance premiums for himself and his wife. The aforementioned deductions are accessible to Mr. Vikas if he opts for the old tax system; however, if he picks the new system, they won’t be. Take note that Mr. Vikas also paid Rs. 75,000 in home loan interest throughout the fiscal years 2021–22.
| Particulars | Old Tax Regime (in Rs.) | New Tax Regime (in Rs.) |
| Gross Income | 10,00,000 | 10,00,000 |
| Deductions: | ||
| U/S 80C | 1,50,000 | |
| U/S 80 | 25,000 | |
| U/S24(b) | 75,000 | |
| Taxable Income | 7,50,000 | 10,00,000 |
| Tax Slab (OLD) | ||
| 0-2.5 lakh | – | – |
| 2.5 lakh – 5 lakh @5% | 12,500 | – |
| 5 lakh – 10 lakh @20% | 50,000 | – |
| >10 lakh @ 30% | – | – |
| Tax Slab (New) | ||
| 0- 2.5 lakh | – | – |
| 2.5 lakh – 5 lakh @5% | – | 12,500 |
| 5 lakh- 7.5 lakh @10% | – | 25,000 |
| 7.5 lakh- 10 lakh @15% | – | 37,500 |
| 10 lakh – 12.5 lakh @ 20% | – | – |
| 12.5 lakh- 15 lakh @ 25% | – | – |
| >15 Lakh @ 30% | – | – |
| Income Tax | 62,500 | 75,000 |
| Cess @4% | 2,500 | 3,000 |
| Total Tax Outgo | 65,000 | 78,000 |
This table indicates that the earlier system is preferable for tax planning if the gross income is greater than Rs. 10 lakh or if deductions under Sections 80C, 80D, and 24(b) of the Income Tax Act have been taken. While the new tax slab system may be more advantageous for taxpayers with middle-class incomes who have a gross income of Rs. 5 lakh.
Tax Slab- FAQs
- What is the fundamental exemption cap for the AY 2022–23?
Answer-The maximum amount of income tax that individuals, HUFs under 60 years old, and NRIs can avoid paying is Rs 2,50,000. The tax amount determined as above will be subject to an extra 4% health and education cess.
- Who qualifies for the 87A rebate?
Answer-You qualify for a rebate under Section 87A if your net taxable income is less than or equal to Rs 5 lakh (effective from A.Y. 20-21).
- If my annual income is less than Rs. 2.5 lakhs, should I file an income tax return?
Answer-It is necessary to file an income tax return if your total taxable income exceeds the Rs. 2.5 Lakhs maximum exempt amount.
- Can you use the standard deduction under the new tax law?
Answer-Under the new tax law, the standard deduction under sections 80TTA or 80TTB is not accessible. The income tax slab rate is lower under the new tax system. Because of this and section 87A, all taxpayers will have lower tax liabilities under the new tax system than under the previous one.