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Understanding Income Tax Slabs in 2024: A Comprehensive Guide

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Synopsis:

In this article, we will discuss the income tax slabs and how they function. We look at the slabs and rates in both the old and new regimes of our income tax system. We go through the calculation of tax rates based on the slab system, and also compare the old and new regimes to get a clear idea about their differences.

Knowing the nature of income tax slabs is kind of like the fundamentals of understanding income tax. They determine whether a taxpayer is liable to pay tax and if so how much. So, in this article, let’s dig into that and try to make sense of the slabs. Shall we?

What is an Income Tax Slab?

Think of income tax slabs like the layers of a cake. Each is representative of a different tax rate on a different range of your income. The more you earn, the higher the tax rate for that "layer" of income. These slabs ensure everybody pays what is their due contribution, which is proportionate to their earning capacity. It is basically a way to ensure that billionaires don't pay the same rate as somebody drawing an average salary.

Comparison of Current Tax Rates Under New Tax Regime & Old Tax Regime in 2024

Let's break down the comparison of tax rates between the new and old tax regimes AY 2024-25:

Tax Rates

Old regime (without deductions) 

New regime (without deductions)

Nil

Up to ₹2,50,000

Up to ₹3,00,000

5%

₹2,50,001 to ₹5,00,000

₹3,00,001 to ₹7,00,000

10%

NA

₹7,00,001 to ₹10,00,000

15%

NA

10,00,001 to ₹12,00,000

20%

₹5,00,001 to ₹10,00,000

₹12,00,001 to ₹15,00,000

25%

NA

NA

30%

Above ₹10,00,000

Above ₹15,00,000

Income Tax Slab Rates For FY 2022-23 (AY 2023-24)

a. New Tax Regime slabs until 31st March 2023

Income Range 

Tax Rate

Up to ₹2,50,000

Nil

₹2,50,001 to ₹5,00,000

5%

₹5,00,001 to ₹7,50,000

10%

₹7,50,001 to ₹10,00,000

15%

₹10,00,001 to ₹12,50,000

20%

₹12,50,001 to ₹15,00,000

25%

Above ₹15,00,000

30%

b. Old Tax Regime until 31st March 2023.

No revisions in the old tax regime have been announced for AY 2024-2025. So the previous year’s slabs are the same as the current slabs.

Income Range 

Tax Rate

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%

How to Calculate Income Tax from Income Tax Slabs?

The calculation of tax liability is much simpler than it sounds. In four simple steps you can figure out the total tax liability from your taxable income.

  1. Total income: Find out your total taxable income, by adding all the different earnings that come are taxable

  2.  Slab separation: Separate your income into relevant slabs

  3. Tax for different slabs: Take the amount that comes under each slab, and apply the tax rate applicable, to find out the tax from that slab

  4.  Total tax liability: Add the taxes from the different slabs to get the total of the tax liability

Let’s take an example to understand this. Imagine you earn 10,00,000 under the new regime for AY 2024-25:

This is how your income would be split into slabs. 

Tax slab

Taxable income

Rate

Tax

Upto ₹3,00,000

₹3,00,000

0 percent

0

₹3,00,001 to ₹6,00,000

₹3,00,000

5 percent

₹15,000

₹6,00,001 to ₹9,00,000

₹3,00,000

10 percent

₹30,000

₹9,00,001 to ₹10,00,000

₹1,00,000

15 percent

₹15,000

Now, let’s add the taxes from each slab to get the total tax = ₹15,000 + ₹30,000 + ₹15,000 = ₹60,000

Income Tax Slabs for Senior Citizens

Income tax slab for Senior citizens (60 years and above) enjoy higher exemption limits:

Income Range 

Tax Rate

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%

For super senior citizens (80 years and above), the exemption limit is even higher:

Income Range

Tax Rate

Up to ₹5,00,000

Nil

₹5,00,001 to ₹10,00,000

20%

Above ₹10,00,000

30%

Conclusion

There you go, guys—not exactly a very complicated concept, was it?. Be it the new regime tax slabs or continuing with the old one, how the slab systems in tax work will help you plan better and save more. Remember, taxes need not give you a headache. If you know a little, it's almost as if you can navigate the tax world like a pro and maybe even have some fun with it. Okay, maybe not fun, but at least you won't dread it as much.

Disclaimer: Investments in the securities market are subject to market risk, read all related documents carefully before investing. This content is for educational purposes only. Securities quoted are exemplary and not recommendatory.

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Frequently Asked Questions

Who makes changes to the income tax slabs in India?

Answer Field

Revision in income tax slabs is carried out by the Government of India. It stems from within the Ministry of Finance and is presented by the Finance Minister as part of the annual Union Budget.

When are the changes to the income tax slabs in India proposed?

Answer Field

Income tax slabs get changed when the Union Budget is presented, normally in the month of February each year. The changes are normally applicable from the next financial year.

Who should prefer the new tax regime slabs?

Answer Field

New regime shall benefit people who do not have much investments or deductions to claim. It has reduced rates but disallows most of the deductions and exemptions.

How is ₹7 lakh income tax-free?

Answer Field

Under the new tax regime, income of up to ₹7 lakh is effectively tax-free since the liability is brought down to zero through a rebate by Section 87A for such income.

What is the disadvantage of the new tax regime?

Answer Field

The disadvantage with the new income tax slab is that most of the deductions and exemptions, including those for investments under Sec 80C, home loan interest and others, are not available, which could push up taxable income.

Who can claim rebate under Section 87A?

Answer Field

Any person whose total income is limited to ₹5 lakh shall be eligible for rebate under Section 87A. This rebate reduces tax liability to zero, making them, in effect, exempt from paying income tax.

Which tax regime is better for a ₹5 lakh salary?

Answer Field

In the case of a salary of ₹5 lakh, the old regime may be more helpful in case you have substantial deductions to avail. Under the new regime, you will anyway get simpler taxation and arguably lower taxes if you have minimal deductions.

Which tax regime is better for ₹15 lakh?

Answer Field

In case of substantial deductions and exemption, a salary of ₹15 lakh may get better treatment under the old regime. Under the new regime, if you don't have much by way of deductions, the tax rates may be lower.

Which tax regime is better for ₹12 lakh p.a.?

Answer Field

See your deductions and exemptions at a salary of ₹12 lakh. If you have a lot of them, old is more lucrative. If not, the new regime is simpler and perhaps brings a lower tax burden.

Are there separate income slab rates for different categories?

Answer Field

Yes, there are different income slab rates for various categories like individuals below 60 years, senior citizens from 60-80 years of age, and super senior citizens above 80 years. Every category has a different limit of exemption and rate of tax.

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