Income Tax Slabs: Tax Rates Under Old And New Regime Ahead of Union Budget 2023

Budget 2023: One of the key demands from the Union Budget has been to change the existing personal income tax structure in order to provide relief to a large section of people, especially the salaried and middle class.

Reportedly, the government has examined proposals to add more slabs to the new income tax scheme.

Budget 2023 LIVE Updates: FM Nirmala Sitharaman to Present Budget Today, Will Tax Slabs Change?

What is an income tax slab?

Income tax is levied on individual taxpayers on the basis of a slab system. It is a system where different tax rates are prescribed for different ranges of income. It means the tax rates keep increasing with an increase in the income of the taxpayer.

Income Tax LIVE Updates: ‘Attractive Makeover’ of New Tax Regime with Slab Change in Budget 2023

Income Tax Slabs: Budget 2023 will soon be announced by Finance Minister Nirmala Sitharaman. It is expected that the FM will make the announcement regarding the income tax slabs and rates, which is one of the key watch out for by many, including the salaried and the middle class.

Experts expect some income tax relief this year. Currently, the income tax is exempt for individuals on an annual income of up to Rs 2.5 lakh, while it can be tax-free up to Rs 5 lakh under the new tax regime using rebate under Section 87A.

Here’s the comparison of the current income tax rates and slabs under the new regime and the old regime.

In India, currently there are two income tax regimes. Individuals can use any one of these.

Under the old regime, the income tax is exempt up to Rs 2.5 lakh/annum, and over and above this, various deductions can be claimed under Section 80C, 80D, 80CCD, etc, to reduce taxable income. These sections are part of the Income Tax Act.

Introduced in the Budget 2021-22, under the new income tax regime, no income tax is levied on an annual income of up to Rs 5 lakh, without any deductions.

However, if the annual income exceeds Rs 5 lakh, let’s say if it becomes Rs 5.5 lakh, income tax on the whole Rs 3 lakh is levied (income up to Rs 2.5 lakh is exempt under both regimes). No deductions can be claimed under the new regime.

Existing Income Tax Slabs and Rates Under Old Regime Vs New Regime:

Annual Income (in Rs)- Old Regime — New Regime

Upto Rs 2,50,000 —           Nil — Nil

2,50,000-5,00,000 —         5% — 5%

5,00,000-7,50,000 —       20% — 10%

7,50,000-10,00,000 —     20% — 15%

10,00,000-12,50,000 —   30% — 20%

12,50,000-15,00,000 —  30% — 25%

Above 15,00,000 —       30% — 30%.

According to a report by Kantar, people are expecting an announcement in policy changes with respect to income tax. They want an increase in basic income tax exemption limit (from current Rs 2.5 Lacs) is the most common expectation among consumers followed by the increase in the threshold limit of highest tax slab rate of 30% (from current Rs 10 Lacs).

The former is notably higher amongst the Salaried segment (42%) while the latter is expected more by businessmen/ self-employed (37%) and older 36-55 year olds (42%) segments.

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