1800-270-7000

Aditya Birla Sun Life Insurance Company Limited

Updated New & Old Income Tax Slabs and Rates in India

15 July 2022

10 mins

★

Rated by reader

Get Guaranteed Returns After a Month^

Table of Contents

Finance Minister Smt Nirmala Sitharaman introduced the new tax regime under Budget 2020. The budget introduced an increase in tax slabs along with decreased tax rates. The deductions and exemptions available in the old tax regime were removed from the new regime. As a taxpayer, you may feel confused when choosing between the old and the new tax regime. It may seem like a difficult choice, but a detailed understanding of the two will allow you to compare the two tax brackets and make a well-informed decision. As a citizen, it is your responsibility that you make a note of all such amendments and also follow them.

What is the Income Tax Slab in India?

In India, individuals, Hindu Undivided Families and firms are mandated to pay a tax that is levied on the income that they earn. There is a set strategy for the payment of this tax which is called the income tax. These sets in which tax rates are divided are called tax slabs. The 2020 Union Budget has brought new updates to the taxation system and tax slabs.

As per the Indian taxation system, an individual has to pay taxes on the basis of the income slab that she/he falls in. When an individual’s income increases, there is an increase in tax liabilities as well.

Difference of Slab Rates Between New Tax Regime vs Old Tax Regime for Taxpayers

Given below is a table of comparison that would help you understand the two tax regimes and their differences:

Income Range	Old Tax Regime	New Tax Regime
Till ₹2.5 lakhs	Nil	Nil
From ₹2.5 lakhs - 5 lakhs	5%	5%
From ₹5 lakhs - ₹7.5 lakhs	20%	10%
From ₹7.5 lakhs - ₹10 lakhs	20%	15%
From ₹10 lakhs - ₹12.5 lakhs	30%	20%
From ₹12.5 lakhs - ₹15 lakhs	30%	25%
Income over ₹15 lakhs	30%	30%

Source: https://www.incometaxindia.gov.in/pages/charts-and-tables.aspx

Categories of Tax Slabs for Individual Taxpayers in India (under Old Tax Regime)

The taxpayer in India is divided into the following categories:

Individuals below 60 years of age, including residents as well as non-residents
Individuals between 60-80 years of age: Senior Citizens
Individuals above 80 years of age: Super Senior Citizens
Domestic companies
Partnership firm or LLP

Let us take a look at the different tax slabs:

Income Tax Slab Rates for FY 2021-22 AY 2022-23 - For the Individuals under 60 Years of Age HUF and NRIs

Income Tax Slab	Rates for the Individuals under 60 years of age
Till ₹2.5 lakhs	Nil
From ₹2.5 lakhs - ₹5 lakhs	5%
From ₹5 lakhs - ₹10 lakhs	20%
Over ₹10 lakhs	30%

Income Tax Slab Rates for FY 2021-22 AY 2022-23 - For the Age Group 60 - 80 Years

Income Tax Slab	Rates for the Individuals for the age group 60 - 80 years
Till ₹3 lakhs	Nil
From ₹3 lakhs - ₹5 lakhs	5%
From ₹5 lakhs - ₹10 lakhs	20%
Over ₹10 lakhs	30%

Source: https://www.incometaxindia.gov.in/pages/charts-and-tables.aspx

Income Tax Slab Rates for FY 2021-22 AY 2022-23 - For the Individuals Over the Age of 80 Years

Income Tax Slab	Rates for the Individuals for the age group 60 - 80 years
Till ₹5 lakhs	Nil
From ₹5 lakhs - ₹10 lakhs	20%
Over ₹10 lakhs	30%

Difference of Slab Rates Between New Tax Regime vs Old Tax Regime for Domestic Businesses

The table of comparison given below will help understand the slab rates between new tax regime vs old tax regime for domestic businesses:

Particulars	New Regime	Old Regime
A company that has: - Opted for Section 115BAB - Is registered on/ after 1st October, 2019 - Commenced manufacturing on/ before 31st March, 2023	15%	-
A company that has: - Opted for Section 115BAA - The total income is to be calculated without claiming - Incentives - Deductions - Exemption - Depreciation	22%	-
A company that has: – Is registered on/ after 1st March, 2016 – Is engaged in manufacturing things that do not claim deductions	25%	-
A company that has: – A turnover/ Gross Receipt less than ₹400 crores in 2018-19	25%	25%
Any other domestic company	30%	30%

Comparison of the New Tax Regime and Old Tax Regime

To understand the two tax regimes a little better, let us now see this example. Ramesh Nair is a 36-year-old software engineer with a salary of ₹15 lakhs a year his monthly house rent is ₹30,000, which comes to ₹3.6 lakhs a year. Here is his salary break-up:

A basic salary income of ₹15 lakhs per year
The LTA is ₹20,000
HRA of ₹4 lakhs per annum
A Special Allowance or ₹2.85 lakhs
Ramesh Nair falls in the category of an Individual Resident Indian

Nature	Amount (in ₹ lakhs)	Deductions (in ₹ lakhs)	Taxable Income (Old regime)	Taxable Income (New regime)
Basic	15	Not applicable	15	15
HRA	4	3.6	0.4	4
Special Allowances	2.85	Not applicable	2.85	2.85
LTA	0.2	0.2	0	0.2
Standard Deduction (for salaried)	-	0.5	0.5	Not applicable
Total Income	₹22.05 lakhs	₹4.3 lakhs	₹17.75 lakhs	₹22.05 lakhs

Tax Calculation under the Old Tax Regime:

Nature	Amount in ₹	Total in ₹
Salary	17,75,000
Any other source of income	45,000
Gross total income		18,20,000
Deductions U/S 80C U/S 80D U/S 80TTA
	1,50,000
	20,000
	10,000	1,80,000
Taxable Income		1,64,000
Tax portion		3,04,500
Health and education cess		12180
Total tax liability (including cess)		3,16,680

Tax Calculation under the New Tax Regime:

Nature	Amount in ₹	Total in ₹
Salary	22,05,000
Any other source of income	45,000
Taxable Income		20,50,000
Tax portion		4,12,500
Health and education cess		16,500
Total tax liability (including cess)		4,29,000

List of Deductions "Not allowed" Vs "Allowed" under the New Regime

If you opt for the new tax regime, you may have to let go of certain deductions and exemptions that are otherwise available in the old regime. Out of the 70 such deductions and exemptions, the common ones that are Not Allowed are listed below. The table also shows the deductions that are allowed.

Exemptions and Deductions that are Allowed	Exemptions and Deductions that are Not Allowed
Transport Allowance for the Specially abled	House rent Allowance
Conveyance Allowance for expense for travelling to work	Leave Travel Allowance
Deduction for Employment of new employees under Section 80JJAA	Relocation Allowance
Depreciation Under Section 32 of the Income Tax Act	Children Education Allowance
Investments in Notified pension Scheme	Interest on Housing loan
Allowance for travelling for employment or on transfer	Professional Tax
	Conveyance Allowance

Why is the New Tax Regime is Optional?

There are still a number of confusions and concerns regarding the new tax regime, and there are many who are still unable to decide which one they should opt for. The new regime is available to HUF as well as individuals and is completely optional. You can get concession rates with an income up to ₹15 lakhs. In case you wish to forgo the deductions that are available in the old tax regime, you are free to file your returns under the new regime.

What is a Surcharge on Income Tax?

In case your income falls under the high tax bracket, and beyond a certain limit set by the government, you would be liable to pay an extra fee or additional tax known as a surcharge. This extra fee is added to the cost/ price of a service or a product over and above the original price. Thus, the surcharge is not a part of the price quoted initially but added to the existing price. The Surcharge Rates that are applied are different for different taxpayers. Let us see how

Type of the Taxpayer	Income Limit	Surcharge Rate
Individual/ BOI/ AOP/ HUF	From ₹50 lakhs to ₹1 crore	10%
Individual/ BOI/ AOP/ HUF	From ₹1 crore to ₹2 crores	15%
Individual/ BOI/ AOP/ HUF	From ₹2 crores to ₹5 crores	25%
Individual/ BOI/ AOP/ HUF	Above ₹5 crores	37%
Firm/ Local Authorities/ Co-Op Society/ LLP	Above ₹1 crore	12%
Foreign Companies	From ₹1 crore to ₹10 crores	2%
Domestic Companies	From ₹1 crore to ₹10 crores	7%
Domestic Companies	Above ₹10 crores	12%

How Surcharge is Calculated?

As explained earlier, a surcharge is a tax that is levied on a tax. Calculated on the payable tax, a surcharge is not dependent on the income that is being generated. So, for instance, a 10% on an existing 30% will effectively raise the tax to 33%. For example, on ₹50, a 10% surcharge would be ₹5, in all the payable tax would be ₹55.

When can the New Tax Regime be Opted?

For Salaried Individuals

At the beginning of every financial year, salaried individuals can select between the old and new tax regimes.

For Business

Can be chosen once for a particular business.

Things to Keep in Mind Before Opting for the New Tax Slab

Make sure you keep the following points in mind when filing your ITR

Under Section 80CCD(2) a deduction is available if an employer is making a contribution to the employee’s NPS account.

The maximum amount that can be claimed is 10% of the basic salary + dearness allowance.

The new tax regime doesn’t allow any exemptions based on the age limit of the taxpayer.

Under Section 87A of the Income Tax Act, the maximum tax rebate is ₹12,500.

In case you want to opt for the new regime, you must inform your employer. You can do this through the declaration form. Your employer will accordingly deduct the monthly TDS.

Not informing your employer simply means that you wish to continue with the old tax regime.

In the case of TDS, once you decide to go with the new tax regime, you would be able to switch only at the end of the financial year.

You have the right to choose either of the two at the time of filing your ITR.

What is a Surcharge on Income Tax?

Type of the Taxpayer	Income Limit	Surcharge Rate
Individual/ BOI/ AOP/ HUF	From ₹50 lakhs to ₹1 crore	10%
Individual/ BOI/ AOP/ HUF	From ₹1 crore to ₹2 crores	15%
Individual/ BOI/ AOP/ HUF	From ₹2 crores to ₹5 crores	25%
Individual/ BOI/ AOP/ HUF	Above ₹5 crores	37%
Firm/ Local Authorities/ Co-Op Society/ LLP	Above ₹1 crore	12%
Foreign Companies	From ₹1 crore to ₹10 crores	2%
Domestic Companies	From ₹1 crore to ₹10 crores	7%
Domestic Companies	Above ₹10 crores	12%

Key Takeaways

**Point 1:**The old tax regime is still in place. The taxpayer has the right to choose either of the two regimes. The Government lays no compulsion.

Point 2: The new tax regime does not make it obligatory for the taxpayer to invest in any tax-saving financial products.

**Point 3:**There are several tax slabs, and the taxpayer can fit into the one that best suits their annual income.

Point 4: The new tax regime disallows the taxpayer to take the benefit of certain deductions and exemptions.

Point 5: The taxpayer can exercise this choice every year and choose the regime that best suits their annual income.

Conclusion

As a taxpayer, understanding and following the changes brought in by the tax regime may seem challenging. Once you understand each detail and difference, choosing the appropriate one will be clearer.

To sum it up, it can be said that if you are a high earner or earn over ₹15 lakhs a year, the old tax regime could be a more practical alternative. The new tax regime, on the other hand, would be more beneficial for the taxpayers who have an annual income of up to ₹15 lakhs.

With the help of various free online tools, you can calculate the tax as per the two regimes and get a better picture of the tax regime to follow. Nevertheless, if you still feel that the process is daunting, you can always take the help of a professional.