Old vs New Income Tax Slabs for FY 2023-24 and AY 2024-25
India’s tax system offers a choice between the old and new regimes, and the decision could impact your finances significantly. The new tax regime, introduced in the Union Budget 2020, aims to simplify taxes by offering lower tax rates but with fewer deductions and exemptions. As of FY 2023–24 and AY 2024–25, this new regime is the default option. However, taxpayers can still choose between the old and new regimes based on their financial needs.
Are you taking full advantage of the deductions available under the old regime? Or does the simplicity of the new regime better fit your financial strategy? This blog will break down how the old and new tax slabs compare, helping you make an informed choice based on your income and financial goals. Ready to optimize your tax strategy? Let’s dive in.
What are Income Tax Slabs?
The ranges of income levels that define the tax rate you pay in India are known as income tax slabs. Your total income is taxed based on which slabs your earnings fall into, each of which specifies a different tax rate. For instance, if your income is within a specific range, you pay tax at the rate applicable to that slab. While income levels below a certain threshold may be taxed at reduced rates or not at all, higher income levels are subject to higher rates of taxation. The income tax slabs are designed to make the tax burden proportionate to your income, resulting in a progressive and equitable tax system.
Having gained an understanding of income tax slabs, let us examine the revised tax slabs for the fiscal years 2023–2024 and 2024–2025. These changes, included in the most recent budget, feature a simplified tax structure and altered rates. Here is a closer look at the new slabs and how they differ from the old tax slab for FY 2023-24.
New Income Tax Slabs for FY 2023-24 AND FY 2024-25
| Income Tax Slabs for FY 2023-24 | Tax Rates | Income Tax Slabs for FY 2024-25 | Tax Rates |
| Slab 1: Upto ₹3,00,000 | Nil | Slab 1: Upto ₹3,00,000 | Nil |
| Slab 2: ₹3,00,001 to ₹6,00,000 | 5% | Slab 2: ₹3,00,001 to ₹7,00,000 | 5% |
| Slab 3: ₹6,00,001 to ₹9,00,000 | 10% | Slab 3: ₹7,00,001 to ₹10,00,000 | 10% |
| Slab 4: ₹9,00,001 to ₹12,00,000 | 15% | Slab 4: ₹10,00,001 to ₹12,00,000 | 15% |
| Slab 5: ₹12,00,001 to ₹15,00,000 | 20% | Slab 5: ₹12,00,001 to ₹15,00,000 | 20% |
| Slab 6: Above ₹15,00,000 | 30% | Slab 6: Above ₹15,00,000 | 30% |
Also Read: Tapping into Section 57 of the Income Tax Act, 1961: A Manual to Tax Efficiency
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The old tax slab for FY 2023-24 offers a more nuanced tax structure. It allows taxpayers to potentially lower their taxable income through various deductions and exemptions, making it an appealing choice for those who can strategically utilize these benefits. In contrast, the old tax slab for FY 2023-24 offers a more flexible approach with various tax slabs and deductions, allowing for customization based on individual financial circumstances.
After reviewing the new income tax slabs for FY 2023-24 and FY 2024-25, it’s important to understand how these compare with the old tax slab for FY 2023-24. Let’s get into the details of the old income tax slabs for FY 2023-24, which offer different benefits and structures for taxpayers.
Old Income Tax Slabs for FY 2023-24
| Category | Income Tax Slab | Tax Rate |
| Individuals Below 60 Years | Up to ₹2,50,000 | Nil |
| ₹2,50,001 to ₹5,00,000 | 5% | |
| ₹5,00,001 to ₹10,00,000 | 20% | |
| Above ₹10,00,000 | 30% | |
| Senior Citizens (60-80 Years) | Up to ₹3,00,000 | Nil |
| ₹3,00,001 to ₹5,00,000 | 5% | |
| ₹5,00,001 to ₹10,00,000 | 20% | |
| Above ₹10,00,000 | 30% | |
| Super Senior Citizens (Above 80 Years) | Up to ₹5,00,000 | Nil |
| ₹5,00,001 to ₹10,00,000 | 20% | |
| Above ₹10,00,000 | 30% |
Also Read: A Guide to Fixed Income Options for Senior Citizens
Let’s explore how these provisions work and who stands to benefit, ensuring you have a comprehensive grasp of the opportunities available to you under the current tax framework.
Tax Rebate and Standard Deductions
- Rebate Eligibility Under New Income Tax Slabs for FY 2023-24
Under the new tax regime, a rebate under Section 87A is available for individuals with a total income of up to ₹7,00,000. The rebate is equal to the amount of income tax payable on the total income or ₹25,000, whichever is less. This effectively means that individuals with an income of up to ₹7,00,000 do not have to pay any income tax.
- Rebate Eligibility Under Old Tax Slab for FY 2023-24
Under the old tax slab for FY 2023-24, a rebate under Section 87A is available for individuals with a total income of up to ₹5,00,000. The rebate equals the amount of income tax payable on the total income or ₹12,500, whichever is less. This means that individuals with an income of up to ₹5,00,000 do not have to pay any income tax.
- Standard Deduction
The new tax regime does not allow for most deductions and exemptions (like those under Section 80C and 80D), including the standard deduction. However, the old tax slab for FY 2023-24 allows a standard deduction of ₹50,000 for salaried individuals and pensioners.
Also Read: Understanding Section 193: TDS on Interest on Securities in Income Tax Act
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Beyond the standard tax slabs and deductions, another aspect of your tax liability involves the surcharge and cess. Let’s get into the details of these additional levies to ensure you’re fully equipped to navigate the tax landscape.
Surcharge and Cess
In addition to standard income tax rates, the government imposes surcharges and cess as supplementary levies. These additional charges enhance an individual’s or entity’s basic tax liability and are designated for specific purposes. Collectively, surcharges and cess play an essential role in the tax system, helping the government address targeted spending areas and fulfill diverse fiscal requirements.
| Total Income Level | Surcharge Rates |
| Exceeds ₹50 lakh but does not exceed ₹1 crore | 10% of Income Tax |
| Exceeds ₹1 crore but does not exceed ₹2 crore | 15% of Income Tax |
| Exceeds ₹2 crore but does not exceed ₹5 crore | 25% of Income Tax |
| Exceeds ₹5 crore | 37% of Income Tax |
Note: Under the new tax regime, the highest surcharge rate was reduced from 37% to 25% in Budget 2023.
- Health and Education Cess
A health and education cess of 4% is applicable on the income tax and surcharge.
Also Read: Securing Your Child’s Future: Fixed Income Strategies for Higher Education in India
To provide a clearer understanding of how the tax system works in practice, let’s walk through some examples of tax calculations.
Examples of Tax Calculations
- Calculation for Income of ₹8,00,000
| Tax Slab | Old Regime | New Regime |
| Income | ₹8,00,000 | ₹8,00,000 |
| Deductions | ₹1,50,000 (assuming Section 80C) | Nil |
| Taxable Income | ₹6,50,000 | ₹8,00,000 |
| Tax Calculation | ||
| Up to ₹2,50,000 | Nil | Nil |
| Next ₹2,50,000 | 5% (₹12,500) | 5% (₹15,000) |
| Next ₹1,00,000 | 20% (₹30,000) | 10% (₹20,000) |
| Total Tax | ₹42,500 | ₹35,000 |
| Rebate under Section 87A | Not applicable | Not applicable |
| Health and Education Cess | 4% (₹1,700) | 4% (₹1,400) |
| Total Tax Payable | ₹44,200 | ₹36,400 |
Also Read: Maximize Your Tax Savings with HRA Exemption: A Complete Guide
- Calculation for Income of ₹40,00,000
| Tax Slab | Old Regime | New Regime |
| Income | ₹40,00,000 | ₹40,00,000 |
| Deductions | ₹1,50,000 (assuming Section 80C) | Nil |
| Taxable Income | ₹38,50,000 | ₹40,00,000 |
| Tax Calculation | ||
| Up to ₹2,50,000 | Nil | Nil |
| Next ₹2,50,000 | 5% (₹12,500) | 5% (₹15,000) |
| Next ₹3,00,000 | 20% (₹1,00,000) | 10% (₹30,000) |
| Next ₹3,00,000 | 20% (₹1,00,000) | 15% (₹45,000) |
| Next ₹2,00,000 | 20% (₹60,000) | 20% (₹60,000) |
| Above ₹15,00,000 | 30% (₹28,50,000) | 30% (₹25,00,000 |
| Total Tax | ₹9,67,500 | ₹9,00,000 |
| Surcharge (25%) | ₹2,41,875 | ₹2,25,000 |
| Health and Education Cess (4%) | ₹48,375 | ₹45,000 |
| Total Tax Payable | ₹12,57,750 | ₹11,70,000 |
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As we dive deeper into the comparison between the new and old tax slab for FY 2023-24, it’s essential to weigh the advantages and disadvantages of each.
Benefits and Limitations of the New and the Old Income Tax Slabs for FY 2023-24
New Income Tax Slabs for FY 2023-24
| Benefits | Limitations |
| Offers lower tax rates across income slabs, providing immediate tax relief. | Eliminates most deductions and exemptions that were available under the old regime. |
| Simpler and more straightforward tax structure with default option, eliminating the need for complex choices regarding deductions and exemptions. | Taxpayers with significant eligible expenses, like investments under Section 80C or medical insurance under Section 80D, may face higher taxes due to the loss of these deductions. |
| Easier compliance for taxpayers with fewer or no deductions. | Streamlined approach offers fewer ways to customize tax savings, which can disadvantage those who previously used various tax-saving tools. |
Old Income Tax Slabs for FY 2023-24
| Benefits | Limitations |
| Offers various deductions, including Section 80C (up to ₹150,000) for investments and Section 80D for health insurance premiums, which can significantly lower taxable income. | Involves numerous deductions and exemptions, which can complicate tax planning and require detailed documentation. |
| A standard deduction of ₹50,000 is available for pensioners and salaried individuals, further reducing taxable income. | Tax rates are generally higher. |
| Taxpayers can use multiple deductions and exemptions to customize their tax savings, reducing their overall tax burden. | The tax burden for individuals would result in fewer deductions. |
Also Read: Comprehensive Breakdown of Budget 2024: Live Updates & Highlights
Conclusion
Your individual financial circumstances, income levels, and allowable deductions all play a crucial role in selecting the appropriate tax regime. If you have qualifying expenses, the old tax slab for FY 2023-24 offers numerous deductions and exemptions that can drastically lower your taxable income. However, the new system provides a more straightforward tax structure with reduced tax rates, which may benefit you if you have fewer deductions.
If you have a low to moderate income and few deductions, the new system might be advantageous due to its simpler design and lower tax rates. On the other hand, if you have a high income and look for significant deductions, the previous system might benefit you more. Ultimately, you should carefully consider your financial situation, qualifying deductions, and income levels to make an informed choice regarding which tax regime to select for new or old tax slab for FY 2023-24 and AY 2024-25.
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