Understanding income tax rates is crucial for every taxpayer to navigate the financial landscape effectively. As we step into the Assessment Year 2024-25, let's delve into the current income tax rates in India and explore key aspects that every taxpayer should be aware of.
Basics:
1.AY.2024-25: Assessment Year 2024-25 represents the period where you earned the income being taxed, corresponding to the Financial Year (FY) 2023-24.
2. The Income Tax Slab
Individual taxpayers are required to pay income tax according to the slab system that applies to them. A person's income can determine which tax bracket they are in. Higher earners will therefore be required to pay more taxes.
To maintain the equity of the nation's tax structure, the slab system was put in place. With every budget announcement, the slabs are altered.
3. Taxable Income: This is your total income after factoring in eligible exemptions and deductions.
Exploring the Income Tax Slabs for FY 2023-24 (AY 2024-25):
A. Old Tax Regime for Individual & HUF
Income Slab (Rs.) | Less than 60 Yrs | 6o to 80 Yrs | More 80 Than Yrs |
Up to 2,50,000 | Nil | Nil | Nil |
2,50,001 - 3,00,000 | 5% | Nil | Nil |
3,00,000 - 5,00,000 | 5% | 5% | Nil |
5,00,000 - 10,00,000 | 20% | 20% | 20% |
Above 10 Lakhs | 30% | 30% | 30% |
· If the total taxable income is less than Rs 5 Lakhs then for individuals than Zero Tax is Payable because he/she gets Rebate u/s 87A up to Rs.12500 tax.
Surcharge: Brace yourself for an additional tax depending on your income bracket:
10% for income exceeding Rs. 50 lakh.
15% for income exceeding Rs. 1 crore.
25% for income exceeding Rs. 2 crore.
37% for income exceeding Rs. 5 crore.
Surcharge rates of 25% or 37%, will not be applicable to the income which is taxable under sections 111A (Short Term Capital Gain on Shares), 112A (Long Term Capital Gain on Shares), and 115AD (Tax on income of Foreign Institutional Investors)
Health & Education Cess: A 4% levy applies on the total income tax and surcharge.
· New Tax Regime for Individual & HUF
Income Slab (Rs.) | Less than 60 Yrs. |
Up to 3,00,000 | Nil |
3,00,001 – 6,00,000 | 5% |
6,00,000 – 9,00,000 | 10% |
9,00,000 – 12,00,000 | 15% |
12,00,000 – 15,00,000 | 20% |
Greater than 15 Lakh | 30% |
· If the total taxable income is less than Rs 7 Lakhs than for individuals then Zero Tax is Payable because he/she gets Rebate u/s 87A.
Surcharge: Brace yourself for an additional tax depending on your income bracket:
10% for income exceeding Rs. 50 lakh.
15% for income exceeding Rs. 1 crore.
25% for income exceeding Rs. 2 crore.
Surcharge rates of 25% or 37%, will not be applicable to the income which is taxable under sections 111A (Short Term Capital Gain on Shares), 112A (Long Term Capital Gain on Shares), and 115AD (Tax on income of Foreign Institutional Investors)
Health & Education Cess: A 4% levy applies on the total income tax and surcharge.
Old Income Tax Regime V/s New Income Tax Regime
Both the Old and New Tax Regimes have their own pros and cons. Here's a breakdown to help you choose:
Old Tax Regime:
· Benefits:
Offers more deductions and exemptions for various expenses like House Rent Allowance, Medical Insurance, Housing Loan interest, Education, etc.
Suitable for individuals with significant investments in tax-saving instruments and expenditure in rentals.
· Drawbacks:
Higher tax rates for higher income brackets.
Complex calculations due to numerous deductions and exemptions.
New Tax Regime:
· Benefits:
Lower tax rates compared to the old regime.
Simpler tax calculations due to fewer deductions and exemptions.
· Drawbacks:
Limited deductions and exemptions.
May not be beneficial for individuals with significant investments in tax-saving instruments.
Understanding Deductions and Benefits You Get in Old Regime & Not in New Regime
Particulars | Old Tax Regime | New Tax Regime |
Income level for rebate eligibility | ₹ 5 lakhs | ₹ 7 lakhs |
Standard Deduction | ₹ 50,000 | ₹ 50,000 |
Effective Tax-Free Salary income | ₹ 5.5 lakhs | ₹ 7.5 lakhs |
Rebate u/s 87A | 12,500 | 25,000 |
HRA Exemption | Yes | No |
Leave Travel Allowance (LTA) | Yes | No |
Other allowances including food allowance of Rs 50/meal subject to 2 meals a day | Yes | No |
Standard Deduction (Rs 50,000) | Yes | Yes |
Entertainment Allowance Deduction and Professional Tax | Yes | No |
Perquisites for official purposes | Yes | Yes |
Interest on Home Loan u/s 24b on slef-occupied or vacant property | Yes | No |
Interest on Home Loan u/s 24b on let-out property | Yes | Yes |
Deduction u/s 80C (Insurance , ULIPS , Schood Fees , etc…) of Rs 1.5 Lakhs | Yes | No |
Employee’s (own) contribution to NPS | Yes | No |
Employer’s contribution to NPS | Yes | Yes |
Medical insurance premium – 80D
| Yes | No |
Disabled Individual – 80U
| Yes | No |
Interest on education loan – 80E | Yes | No |
Interest on Electric vehicle loan – 80EEB | Yes | No |
Donation to Political party/trust etc – 80G | Yes | No |
Savings Bank Interest u/s 80TTA and 80TTB | Yes | No |
Other Chapter VI-A deductions | Yes | No |
All contributions to Agniveer Corpus Fund – 80CCH | Yes | Yes |
Exemption on voluntary retirement 10(10C) | Yes | Yes |
Exemption on gratuity u/s 10(10) | Yes | Yes |
Exemption on Leave encashment u/s 10(10AA) | Yes | Yes |
Daily Allowance | Yes | Yes |
Transport Allowance for a specially-abled person Conveyance Allowance | Yes | Yes |
Conveyance Allowance | Yes | Yes |
Tax Planning Strategies:
To minimize your tax burden, consider these strategies:
● Maximize eligible deductions and exemptions: Utilize the available deductions for investments, medical expenses, donations, etc., to reduce your taxable income.
● Invest in tax-saving instruments: Explore options like PPF, NPS, ELSS funds to benefit from deductions and grow your wealth simultaneously.
● Claim tax benefits on health insurance premiums: Deduct premiums paid for health insurance for yourself and your dependents.
● Claim tax benefits on home loan interest: Deduct interest paid on your home loan up to a specified limit.
● Claim tax benefits on children's education: Deduct tuition fees paid for your children's education up to a specified limit.
Staying Updated on Tax Regulations:
Tax rules and regulations are subject to change. Stay informed about any updates through official government websites and tax-related publications.
Seeking Professional Help:
For complex tax situations, consulting a qualified tax professional is crucial. They can provide personalized advice, ensure accurate calculations, and help you navigate the tax maze smoothly.
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