Individual Income Tax Slab

  • Author :
  • TATA AIG Team
  • Published on :
  • 11/12/2023

Regardless of your income, filing income tax returns in India is mandatory. If you are a salaried employee, your employer would already deduct income tax at source before releasing your monthly salary. Unless you have other sources of income, this takes care of your tax liability.

However, you must file returns to declare your total income and tax paid. In fact, if you have paid excess tax, you can also get a refund from the government.

If you haven’t already filed your IT returns for the financial year 2022-23, then you can still file them till December 31, 2023. While you will have to pay a penalty, you will be able to ensure compliance with the tax laws.

Today, we will talk about everything you need to know regarding income tax for salaried persons in India. Get your financial papers together, learn about the applicable income tax slab for FY 2022 23 for salaried persons, and file your returns today.

The Fundamentals of Income Tax Calculation

In India, income tax for a salaried person applies to every individual whose total annual income is above a predefined threshold limit.

There are various criteria for determining tax liabilities and tax benefits for salaried employees. These are:**

Age

The income tax slabs and threshold income tax limit in India are defined differently for three age groups:**

  1. Regular individuals from 21-60 years old
    
  2. Senior citizens from 60-80 years old
    
  3. Super senior citizens who are more than 80 years old
    

Residential Status

Resident Indians have a different set of taxation rules compared to Non-Resident Indians. This is determined based on the number of days an individual has spent in the country during the current and preceding financial years.

Further, Resident Indians are categorised into Ordinary Resident and Resident But Not Ordinarily Resident Indians.

Gross Total Income

For individuals, income tax is levied by taking income from these five avenues into consideration:**

Salary: this includes wages, pension, and gratuity

Capital Gains: arising from the sale of capital assets

Business or profession: this includes income from any business or professional project

House or property: rental income from a house, land, or any other property

Any other source: this includes a range of sources like interest income, dividends, gifts, etc.

Remember, if you are earning money, it must be included under your gross income for computing income tax liability.

Exemptions and Deductions

You can reduce your tax liability by availing exemptions and deductions under various **Sections of the Income Tax Act.

Broadly categorised, tax benefits for salaried employees include:

Exemptions for:

HRA or Housing Rent Allowance received as part of your salary;

LTA or Leave Travel Allowance received as part of your salary;

Special allowances like Children’s Education Allowance and Hostel Expenditure Allowance, etc.

Gratuity income

Proceeds from the VRS Scheme

Agricultural income

Family pension

Deductions for:

Section 80C: Investments in a range of instruments as specified under the **Section

Section 80D: Premium paid for health insurance for self, spouse, parents, and dependent children

Section 24(b): Interest paid on a home loan

Section 80E: Interest paid on an education loan

Section 80G: Donations to eligible charitable institutions

Section 80TTA: Interest earned on your savings account balance

Section 80C and 80CCD(1): Contributions made to the National Pension Scheme (NPS)

There are many more exemptions and deductions that you can avail of. Remember, these are subject to certain limits and fulfilling the specified terms.

The availability of tax benefits for salaried employees also depends upon your choice of tax regime (old or new).

Net Taxable Income

Your net taxable income is calculated as follows:

Net Taxable Income = Gross Total Income – Eligible Deductions & Exemptions

This will give you the amount that you are liable to pay tax on. The next question is, how much tax should you pay? To answer this, let’s take a quick look at individual income tax slab rates in India.

Individual Income Tax Slab Rates in India

Currently, individuals can opt for the new regime or the old regime for income tax. We will look at income tax limits in India for individuals below the age of 60 years for the current and previous financial years.

Current Financial Year 2023-24 (AY 2024-25)

Income Tax Slab Rates in India for Salaried Individuals for FY 2023-24 – New Tax Regime

Income tax slabs Tax Rate
Up to ₹3 lakhs No tax
Between ₹3 lakhs and ₹6 lakhs 5% of your total income that exceeds ₹3 lakhs
Between ₹6 lakhs and ₹9 lakhs ₹15,000 + 10% of your total income that exceeds ₹6 lakhs
Between ₹9 lakhs and ₹12 lakhs ₹45,000 + 15% of your total income that exceeds ₹9 lakhs
Between ₹12 lakhs and ₹15 lakhs ₹90,000 + 20% of your total income that exceeds ₹12 lakhs
More Than ₹15 lakhs ₹1,50,000 + 30% of your total income that exceeds ₹15 lakhs

You will also have to pay an additional Education and Health Cess of 4% on the tax amount.

Income Tax Slabs for Salaried Persons in India for FY 2023-24 – Old Tax Regime

Income tax slabs Rate of Taxation
Up to ₹2.5 lakhs No tax
From ₹2.5 lakhs – ₹5 lakhs 5% of your total income that exceeds ₹2.5 lakhs
From ₹5 lakhs – ₹10 lakhs ₹12,500 + 20% of your total income that exceeds ₹5 lakhs
Above ₹10 lakhs ₹1,12,500 + 30% of your total income that exceeds ₹10 lakhs

Previous Financial Year 2022-23 (AY 2023-24)

Income Tax Slab for FY 2022-23 for Salaried Persons in India – New Tax Regime

Income tax slabs Tax Rate
Up to ₹2.5 lakhs No tax
Between ₹2.5 lakhs and ₹5 lakhs 5% of your total income that exceeds ₹2.5 lakhs
Between ₹5 lakhs and ₹7.5 lakhs ₹12,500 + 10% of your total income that exceeds ₹5 lakhs
Between ₹7.5 lakhs and ₹10 lakhs ₹37,500 + 15% of your total income that exceeds ₹7.5 lakhs
Between ₹10 lakhs and ₹12.5 lakhs ₹75,000 + 20% of your total income that exceeds ₹10 lakhs
Between ₹12.5 lakhs and ₹15 lakhs ₹1,25,000 + 25% of your total income that exceeds ₹12.5 lakhs
More than ₹15 lakhs ₹1,87,500 + 30% of your total income that exceeds ₹15 lakhs

You will also have to pay an additional Education and Health Cess of 4% on the tax amount.

Income Tax Slab for FY 2022-23 for Salaried Persons in India – Old Tax Regime

Income tax slabs Rate of Taxation
Up to ₹2.5 lakhs No tax
From ₹2.5 lakhs – ₹5 lakhs 5% of your total income that exceeds ₹2.5 lakhs
From ₹5 lakhs – ₹10 lakhs ₹12,500 + 20% of your total income that exceeds ₹5 lakhs
Above ₹10 lakhs ₹1,12,500 + 30% of your total income that exceeds ₹10 lakhs

Surcharge on Income Tax

While the tables above highlight the income tax slabs for salaried persons in India, if your taxable income is more than ₹50 lakhs, then you are required to pay an additional surcharge. The surcharge rates are given below:

Income Tax Rebate for Salaried Individuals Under Section 87A

One of the most important tax benefits for salaried employees is the rebate offered under Section 87A of the Income Tax Act. The rebate offered is different for old and new tax regimes. Here are the details:

Old tax regime – Rebate under Section 87A

If you have opted for the old tax regime and have a taxable income of up to ₹5 lakhs, then you can get a tax relief of up to ₹12,500. To put things into perspective, if your net taxable income is, say ₹4,50,00 post all the deductions and exemptions, then

Tax Liability = 5% of the amount that exceeds ₹2.5 lakhs = 5% of ₹2 lakhs = ₹10,000

However, you can claim tax relief under Section 87A and will not be required to pay any tax!

New tax regime – Rebate under Section 87A

If you have opted for the new tax regime and have a taxable income of up to ₹7 lakhs, then you can get a tax relief of up to ₹25,000.

To put things into perspective, if your net taxable income is, say ₹6,50,00 post all the deductions and exemptions, then

Tax Liability = 5% of the amount that exceeds ₹3 lakhs + 10% of the amount that exceeds ₹6 lakhs

Tax Liability = 5% of ₹3 lakhs + 10% of ₹50,000

Tax Liability = ₹15,000 + ₹5,000 = ₹20,000

Even in this case, you can claim tax relief under Section 87A and will not be required to pay any tax!

It is important to remember that to claim the rebate, your net taxable income should not be more than ₹5 lakhs for the old tax regime and ₹7 lakhs for the new tax regime. Also, the rebate is available only for Indian residents.

Understanding Old and New Tax Regimes

This brings us to a common discussion about income tax in recent years – which tax regime should you opt for? Old or New? Which is better for you?

Before you decide, let’s take a detailed look at the two.

The first question is, why did the government come up with a new regime? What is different about it?

When taxpayers opt for the new regime, they get a range of benefits, including:

Concessional tax rates

Higher rebates

A higher income tax exemption limit for salaried employees

A lower surcharge for high-net individuals

However, to avail of these benefits, they have to let go of many exemptions and deductions available under the old regime.

Income Tax Deductions and Exemptions Allowed for Salaried Individuals Under Old Tax Regime

While the list is not exhaustive, here are some of the income tax benefits offered to salaried individuals in India for the financial year 2023-24:

A standard deduction of ₹50,000

House Rent Allowance (HRA) and Leave Travel Allowance (LTA)

A total tax deduction of ₹1,50,000 under Sections 80C, 80CCC, and 80CCD(1) together.

Section 80C includes investments made in:

Equity Linked Savings Schemes (ELSS)

Public Provident Fund (PPF)

Employee Provident Fund (EPF)

Any recognised provident fund

Life Insurance

National Savings Certificate

Tax Saving Fixed Deposit

Sukanya Samriddhi Yojana

Senior Citizen Savings Scheme (SCSS), etc.

Section 80 CCC includes payments made towards pension funds

Deductions under Section 80CCD(1) include payment made towards Atal Pension Yojana or any other government pension schemes

A tax deduction of up to ₹10,000 on interest earned on your savings account (Section 80TTA)

If you live in rented accommodation and are not being paid HRA, then you can claim a tax deduction on the rent payment under Section 80GG. The deduction amount is the lower of:

Total rent paid minus 10% of the basic salary

₹60,000 per year (₹5,000 per month)

25% of the total adjusted gross total income (Gross Total Income – LTCG – STCG – Tax Deductions)

The entire interest amount paid on an education loan can be claimed for tax deduction (Section 80E)

A tax deduction of up to ₹50,000 on the interest paid on home loans for first-time homebuyers (Section 80EEA)

If you are investing for the first time in equity products under the Rajiv Gandhi Equity Scheme, then you can claim a tax deduction of an amount that is the lower amount between 50% of the amount invested and ₹25,000. (Section 80 CCG)

A tax deduction on the premium paid towards a health insurance policy for self and family under Section 80D. The deduction limits are:

₹25,000 for a policy for self, spouse, and dependent children. If you have included non-senior citizen parents in the policy, then you can get an additional deduction of ₹25,000

If your parents are senior citizens, then the deduction for the premium paid for them increased from ₹25,000 to ₹50,000

A tax deduction on the interest paid on home loans of up to ₹2 lakhs under Section 24b.

Income Tax Deductions and Exemptions Allowed for Salaried Individuals Under New Tax Regime

While most of the tax deductions and exemptions are not available in the new tax regime, here are some eligible deductions/exemptions for salaried individuals:

The bulk amount received while fully or partially withdrawing from the NPS account

The interest or maturity amount received from the PPF account

The interest and maturity amounts received from the Sukanya Samriddhi Account

Gifts received from employers up to ₹5,000

Exemption of up to ₹20 lakhs received as gratuity for non-government employees

The maturity amount received from a life insurance company

Interest paid on a home loan for a rented property

Income Tax Deductions and Exemptions NOT Allowed for Salaried Individuals Under New Tax Regime

Since the new tax regime offers lower rates and better slabs, you cannot claim the following deductions and exemptions:

LTA or Leave Travel Allowance

HRA or House Rent Allowance

Professional Tax

Interest paid on a home loan for a self-occupied property

All tax deductions that are available under the following sections of the IT Act:

35(1)(ii);

35(2AA);

32AD;

33AB;

35(1)(iii);

33ABA;

35(1)(ii);

35CCC(a); and

35AD

Tax deductions under Chapter VI-A under the following sections:

80IA;

80CCC;

80C;

80CCD;

80D;

80CCG;

80DDB;

80EE;

80E;

80EEA;

80DD;

80EEB;

80GG;

80IB;

80IAC; and

80IAB.

Summing Up

We hope you have a better idea about individual tax slabs and rates. Also, the differences between the old and new tax regimes are relatively clear.

If you invest in tax-saving instruments like an individual health insurance policy, PPF, etc. and want to avail of maximum tax deduction and exemption benefits, then the old regime is a better option.

If you have no investments or expenditures to claim as deductions, you can opt for the new tax regime.

You can use income tax calculators to calculate the applicable tax outgo under each regime and choose accordingly.

Health Insurance with Tata AIG

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Tata AIG offers health insurance with some of the best features and benefits, along with unique riders, to help you customise the policy to your needs.

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FAQS

Q1. What is the income tax exemption limit for salaried employees?

Under the new tax regime, the exemption limit has been increased from ₹2.5 lakhs in FY 2022-23 to ₹3 lakhs from FY 2023-24.

Additionally, resident individuals can avail of a standard deduction of ₹50,000 that was only available under the old tax regime until last year. Further, they can claim the rebate under Section 87A that makes a taxable income up to ₹7 lakhs tax-free.

Overall, if a salaried individual earns up to ₹7.5 lakhs in a financial year, then there is zero tax liability.

Q2. How can a salaried person reduce income tax?

To reduce income tax, you can avail of numerous tax deduction and exemption options when filing income tax for salaried persons. However, they are different under the old and new tax regimes.

Under the old regime, you can get a standard deduction of ₹50,000 and deductions for LTA & HRA, eligible investments and expenses made as per Sections 24a, 35(1)(ii), 35(2AA), 32AD, 33AB, 35(1)(iii), 33ABA, 35(1)(ii), 35CCC(a), 35AD, 80IA, 80CCC, 80C, 80CCD, 80D, 80CCG, 80DDB, 80EE, 80E, 80EEA, 80DD, 80EEB, 80GG, 80IB, 80IAC, and 80IAB.

Under the new tax regime, you can get a standard deduction of ₹50,000 and a deduction for the family pension received by you (within certain limits). Further, you can get tax benefits in the interest paid on a home loan for a Let Out property and the withdrawn amount from NPS and PPF accounts. Most deductions and exemptions are not available under the new regime to simplify the process, and better rates are offered instead of them.

Q3. How can a salaried person save maximum taxes?

If you are looking for maximum tax savings, then you need to look at the old tax regime that offers deductions and exemptions for various investments and expenses. Based on your requirements and financial plan, you can choose from a range of options, including PPF, NPS, ELSS, Tax-saving FD, life insurance, EPF, Sukanya Samriddhi Yojana, health insurance, etc.

Disclaimer / TnC

Your policy is subjected to terms and conditions & inclusions and exclusions mentioned in your policy wording. Please go through the documents carefully.

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