The 2023 budget brings some big changes to how much tax you’ll pay. One important change is that if you earn less than Rs 3 lakh, you won’t have to pay any income tax. These changes start on April 1, 2023, and apply to money you make from April 1, 2023, to March 31, 2024. These new tax rules are for the 2023-24 financial year, which affects the 2024-25 tax season. Here’s a table showing the new tax rates for different types of earners:
| Category | Income Range | Tax Rate |
|---|---|---|
| Individuals (Resident & Non-Resident) | Up to Rs. 3,00,000 | Nil |
| Rs. 3,00,001 to Rs. 6,00,000 | 5% | |
| Rs. 6,00,001 to Rs. 9,00,000 | 10% | |
| Rs. 9,00,001 to Rs. 12,00,000 | 15% | |
| Rs. 12,00,001 to Rs. 15,00,000 | 20% | |
| Above Rs. 15,00,000 | 30% | |
| HUFs and AOPs | Up to Rs. 2,50,000 | Nil |
| Rs. 2,50,001 to Rs. 5,00,000 | 5% | |
| Rs. 5,00,001 to Rs. 10,00,000 | 20% | |
| Above Rs. 10,00,000 | 30% | |
| Companies (Domestic) | Turnover up to Rs. 400 crore in FY22-23* | 25% |
| Companies (Foreign) | Turnover up to Rs. 400 crore in FY22-23* | 25% |
In the tax rules for the financial year 2023-24, some important changes have been made to make them more appealing:
1. The new tax rules are now the default ones. This means that unless you specifically choose the old tax rules, your income will be taxed based on the new rules.
2. If your taxable income is up to Rs 7 lakh, you can get a tax rebate of Rs 25,000 under Section 87A. Previously, this rebate was available for incomes up to Rs 5 lakh.
3. The minimum income limit where you don’t have to pay any taxes has been increased to Rs 3 lakh from Rs 2.5 lakh in the new tax rules.
4. The new tax rules have reduced the number of tax brackets from six to five.
5. If you’re a salaried person or a pensioner, you can now deduct Rs 50,000 from your income under the new tax rules.
6. Family pensioners can also deduct Rs 15,000 from their income under the new tax rules.
7. The highest extra tax rate has been reduced from 37% to 25% in the new tax rules.
Here are various instances illustrating the application of these tax rates:
1. Individuals:
Let’s consider an individual with an annual income of INR 5 lakh during the fiscal year 2023-24 (assessment year 2024-25). The tax calculation would be as follows:
– Income up to INR 2 lakh: No tax
– Income from INR 2 lakh to INR 4 lakh: INR 10,000 (5% of INR 2 lakh)
– Income from INR 4 lakh to INR 5 lakh: INR 5,000 (10% of INR 1 lakh)
Therefore, the total tax liability amounts to INR 15,000. This qualifies for a rebate under Section 87A, resulting in no tax payment required.
2. Hindu Undivided Families (HUFs) and Association of Persons (AOPs):
Imagine a HUF with an annual income of INR 6 lakh in the financial year 2023-24 (assessment year 2024-25). The tax liability would be computed as follows:
– Income up to INR 2 lakh: No tax
– Income from INR 2 lakh to INR 4 lakh: INR 10,000 (5% of INR 2 lakh)
– Income from INR 4 lakh to INR 6 lakh: INR 20,000 (10% of INR 2 lakh)
Consequently, the total tax liability adds up to INR 30,000. Since the income exceeds 8 lakhs, a rebate under Section 87A is not applicable.
3. Companies:
Let’s take the example of a domestic company with a turnover of INR 200 crore for the fiscal year ending on March 31st, 2023, and a net profit of INR 30 crore during that period. The tax liability would be calculated as follows:
– Tax rate: 25%
Hence, the total tax liability amounts to INR 7.5 crore.
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